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FINANCIAL TIMES 


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_ WORLD- NEWS BUSINESS NEWS 


Primakov calls for Splits threaten to 
more foreign help derail Japan’s plan 
to support reforms for banking reforms 


Yevgeny Primakov. Russia's 
prime minister, said his country 
had sufficient reserves to avoid 
defaulting bn its debts, but 
appealed for additional financial 
support to underpin future 
reforms. Page 18; Ukraine finks. 
Page 3 . - ; 

Swedes face weaker government 
Sweden was last night braced for 
a weakened minority government 
following the worst election per- 
formance in more then 70 years 
by the ruling Social Democratic 
party. Page 18 

Rockets Mt Tafiban-he« Kabul 
As the number of Iranian troops 
on the Afghan border rose to 
200,000, anti-Taliban forces fired 
rockets into the capital Kabul, 
kilting 16 people on the eve of 
UN talks to resolve the militia’s 
conflict with Tehran. 

Ambrosiano founder beatified 
Pope John Paul beatified 19th 
century Catholic entrepreneur 
Giuseppe Tovini who founded 
the Banco Ambrosiano. 

Kosovans ctahn heavy casualties 
Ethnic Albanian guerrillas claimed 
to have inflicted scores of Ser- 
bian police casualties in fighting 
in northern Kosovo but Western 
sources suspected the high 
death toll was exaggerated. 

fraq Manus US for hafl&ig supplies 
Iraq condemned the US for 
inspecting Iraqi vessels in the 
Gulf and said this was delaying 
the delivery of much-needed 
food and medical supplies. 

Ktanbck firm on Mfian airport ' 
European transport commissioner 
NeH Kinnock warned Italy any 
attempt to force aviates to move 
to a new Milan airport under a 
plan vetoed by the EU Commis- 
sion last week was illegal. 

Chechnya akf workers freed 
Two British ad workers abducted 
in the breakaway Russian region I 
of Chechnya were freed after 
more than a year in captivity. 

Page 2 

Madid in showdown on abortion 
Spain’s centre-right government 
faces a test of Its parliamentary 
strength this week when it tries 
to head off an opposition bill to 
relax the abortion law. Page 2 

Rome faces dash with Marxists 
The Rattan government fs bracing 
Itself for a new dash with its far 
left Marxist allies this week when 
It finaBses the country's budget 
for 1999. Page 2 

German campaign into test round 
With Germany's leading politi- 
cians campaigning furiously tor 
next Simday's federal elections, 
die gap between the main parties 
has narrowed to the point where 
either couW win. Page 2 

Annan to tsnreS global politics ptau 
UN secretary-general Kofi Annan 
will today seek to capture the 
imagination of world leaders 
assembled far the opening of the 
53rd general assembly with a 
message of global politics tor the 
new mStermium. Page 6 

Duchess of York’s mother kiSed 
Susan Barrsntes. the mother of 
the Duchess of York, was kffled 
In a head-on collision on an 
Argentine provincial highway on 
Saturday night 


Cracks have started to appear in 
the cross-paly agreement on 
banking reform struck In Japan 
last week, with government and 
opposition divided about the 
future of the ailing Long-Term 
Credit Bank. Page 19 

Nestte, the world's biggest 
consumer food company, has 
appointed Rainer Gut, Switzer- 
land's best-known international 
banker, as non-executive chair- 
man. Mr Gut, who has chaired 
Credit Suisse Group for 12 years, 
takes over in 2000. Page 19 

CLT-Ofa, Europe’s biggest 
broadcasting group, expects to 
break even in 1998 after a fast 
half in which net operating profits 
doubled to $86m on sales up 7.4 
per cent to $1.6bn. Page 23 

Eureko, a pan-European affiance 
finking six insurance groups, will 
announce it Is pulling out of 
North America with the sale of its 
Canadian and US businesses for 
C$300m (US$200m). Page 19 

Seagram, Canadian entertainment 
group, hopes to get European 
Commission clearance for its 
$10.4bn bid tor Dutch company 
PolyGram. Page 23 

UAL, parent of United Airlines, 
has lost heir apparent John 
Edwardson, who quit after two 
unions declined to back him as 
the next chairman. Page 19 

Yahagf, the Japanese metals 
group that expanded into soft- 
ware and temporary staffing, has 
filed for bankruptcy with esti- 
mated fiabiStia of Y3.5bn • 
($26m). Page 24 

Cemex, Mexican cement 
company, renewed its $1 14.6m 
bid tor a stake in Indonesia's 
partially-privatised cement com- 
pany Semen Gresik. Page 23 

ft# Electric of Japan has sharply 
downgraded its sales and profit 
forecast for the year to next 
; April Page 24 

Colombia has cut the amount of 
money companies must deposit 
with the central bank on Joans 
from abroad, as part of efforts to 
take pressure off Interest and 
exchange rates. Pages 

Hongkong Telecom workers plan 
an overtime ban following a 
weekend of street protests and 
petitions against proposals for a 
10 per cent pay cut Page 4 

Gold Fields of South Africa said 
talks on the sale of its Northam 
Platinum mine to Anglo American 
Platinum Corporation had ended 
without a deal Page 23 

Taiwan's legislature Is to consider 
a plan to merge the Island's 
three biggest commercial banks, 
Chang Hwa Commercial Bank, 
First Commercial Bank and Hua 
Nan Commercial Bank. Page 4 

Chi na plans t o build five large 
hydro-electric power stations 
costing $7.23 bn by 2010, creat- 
ing significant demand for financ- 
ing and equipment Page 6 

Global Investor 

Funk in large tracts of the 
fixed. Income markets 



MONDAY SEPTEMBER 21 1998 


Single currency 
EU*s central bankers 
shun global leadership 



'msMi 


Marcus Wallenberg | E 
No change in direction for 
Sweden's business4ynasiy 
Interview, Page Ifi , y 




Blair to urge 
full overhaul 
of IMF and 
World Bank 

UK prime minister says financial turmoil 
highlights failings of 1 940s institutions 


By Robert Peston, political editor, 
in London and Stephan Fkferfn 
Washington 

Tony Blair win today call for a 
comprehensive overhaul of the 
International Monetary Fund and 
World Bank, saying they have 
failed to provide economic stabil- 
ity in a world of massive cross- 
border capital flows. 

The US prime minister, cur- 
rently chairman of the G7 group 
of seven leading industrial coun- 
tries, wiU argue that the global 
economic and financial turmoil — 
which has spread from the Far 
East to Russia and South Amer- 
ica - hi g Wi ghta the shortcomings 
of the two institutions. 

"The pTrisring system has not 
served us terribly well," said his 
official spokesman, who was 
briefing on a speech to be given 
today by Mr Blair at the New 
York Stock Exchange. "The Bret- 
ton Woods institutions are 54 
years old and were set up when 
international capital flows were 
far smaller." 

The UK's agenda for change, 
which will be fleshed out later 
this week when UK Treasury offi- 
cials meet their US counterparts 
in Washington, includes the 
creation of a code of fiscal and 
financial conduct for all states 
seeking protection from the 
IMF’s safety net 
The UK also wants a partial 
merger of the IMF and World 
Bank, so there is a single institu- 
tion charged with supervising 
and regulating the world eco- 
nomic system. 

The UK government will sug- 
gest there may he a need tor big 
private-sector funds, such as 
tho6e controlled by George Soros, 
to puhlish details of their expo- 
sures to individual economies. 

Ministers are concerned that 
the exchange rate of the rouble 
fell sharply after a recent state- 
ment by Mr Soroswhn was under 
no obligation to disclose whether 
he was likely to benefit from the 
devaluation that followed. 

But Mr Blair's spokesman said; 


"The solution to the world’s 
financial problems does not lie in 
misguided attempts to control 
international markets or trade." 

The proposed code would 
require governments to publish 
their countries' net foreign cur- 
rency exposure on a monthly 
basis and include a breakdown 
between short-term and 
long-term debt 

Common accounting standards 
would be imposed for the public 
and financial sectors, and there 
would be a requirement for secu- 
rities and banking markets to 
adhere to common prudential 
standards. 

"There is a need for greater 
openness and transparency in 
international dealing s,” said Mr 
Blair’s spokesman. "We also 
want better resources and 
improved accountability for 
international financial institu- 
tions." 

Mr Blair's call for reform 
comes as the IMF faces harsh 
criticism over its handling of the 
Asian and Russian financial cri- 
ses. The issue will dominate its 
annual meeting in Washington at 
the end of the month. 

Last week, the US House of 
Representatives rejected a 
request from the Clinton admin- 
istration to vote for an $18bn US 
contribution to a proposed 
$90bn capital increase for the 
Fund. 

The increase may still emerge 
but .of conference deliberations 
between the senate, which has 
voted in favour of the increase, 
and the House. But until it does, 
the IMF’s ability to deal with the 
financial crisis threat ening jatin 
America is open to question. 

Last week. President Bin Clin- 
ton called for a meeting soon of 
finance ministers from leading 
industrialised and developing 
nations to discuss what is called 
the “new financial architecture", 
with a view to preparing a report 
for next year. 

Editorial Comment; Page 17 
TwiDoi In Paris, Page 17 


White House hits 
at ‘partisan vote 5 to 
release jury tapes 







- e THE FINANCIAL TIMES LIMITED 1998 NoJ3.7G9 
tegjgn - Leads * Paris * FiaHMurt • Stockholm - Man * Madrid * Raw Torti 
CMcago • Loa Angeles ■ Tokyo • Hong Kh« 


By Seranl Baker in Washington 

White House officials yesterday 
tried to head off poten ti al dam- 
age from today’s broadcast of 
President Bill Clinton’s grand 
jury testimony in the Monica 
Lewinsky case by saying the 
decision to release the material 
was a partisan attempt to humili- 
ate the president 
"People may question the judg- 
ment of the people who decided 
to put that information .. .before 
the American people and they 
may actually end up questioning 
the motivation, whether this was 
done for partisan purposes and 
ultimately they may question the 
fairness of the process that’s 
going on on Capitol Hill ” said 
John Podesta, White House dep- 
uty chief of staff. 

The decision to go on the offen- 
sive against Republicans, who 
voted to release the videotape 
and 2,800 pages of documents 
relating to the imp eachm ent case 
brought by Kenneth Starr, the 
independent prosecutor, reflected 
nervousness about how the pub- 
lic will react to today's events 
Some officials fear the specta- 
cle of a president questioned by 
prosecutors for more than four 
hours over whether he lied about 
a sexual relationship with Ms 
Lewinsky might damage Mr din- 
ton's standing in the eyes of the 
American public While Mr Clin- 


ton is expected to be seen behav- 
ing in an aggressive and some- 
times evasive manner in the 
tape, he is also said by those who 
have seen It to come across as 
sympathetic at times. 

Ttrny Blair, the UK prime min- 
ister. is expected to share a plat- 
form with Mr Clinton today at 
New York University, but will 
not attempt to defend his pep 
sonal conduct. Downing Street 
said Mr Clinton was a "good 
friend and ally" to Britain, but 
that the Starr report was a mat- 
ter for Congress. 

A leading Democratic senator 
called on Mr Clinton to go 
directly to the House of Repre- 
sentatives’ judiciary committee 
to put his case. “I believe the 
president would be well-served to 
explain exactly what he did, 
exactly what he was thinking; do 
it to the judiciary committee, and 
let’s vote and let's move on one 
way or the other,” said John 
Kerry of Massachusetts. “The 
nation is being ill-served by this 
political water torture.” 

The House judiciary committee 
is considering whether to proceed 
with impeachment of Mr Clinton 
over allegations of perjury and 
obstruction of justice in bis 
attempts to keep his affair with 
Ms Lewinsky secret 

Slipping b foe poto, Page 5 
Editorial Comment, Page 17 


a ■? 70 i 1 * 


H* BbUB N) trn tel* 

flM Ml. — nw ui EM J4WJ ML. — ,IMB 


CONTENTS 


World News 2-6 UK News 7 
Features 10-14 Comment & Analysts 16,17 
Companies & Finance 19-24 World Stock Markets 33-35 


ftfl contents and lac back page 





A cameraman is caught in the war as poBce baton charge demonstrators In Kuala Lumpur yesterday Reuters 

Malaysia’s ex-deputy PM 
arrested after street protest 

Anwar faces charges of illegal assembly and vandalism 


By SheBa Mdfarfty 
b Kuala Lumpur 

Armed Malaysian police 
yesterday arrested Anwar Ibra- 
him. the sacked deputy prime 
minister, for alleged involvement 
in several criminal offences. 

Kuala Lumpur police chief 
Kamarudin Ali said Mr Anwar 
would be brought to court today 
od a number of charges, includ- 
ing breach of peace, illegal 
assembl y and vandalism after up 
to 60,000 supporters took to the 
streets to call for reform of the 
government. 

The detention of Mr Anwar, the 
one-time heir apparent of 
Mahathir Mohamad, the prime 
minister, marks the end of a stan- 
d-off that began on September 2 
when Dr Mahathir fired Mr 
Anwar and orchestrated his 
expulsion from the ruling UMNO 
party. 

Police have been investigating 
Mr Anwar on allegations of a cat- 
alogue of offences, ranging from 
sodomy to treason. Mr Anwar 


denies all of them as part of a 
high-level political conspiracy 
targeting him for becoming Dr 
Mahathir ’s rival. 

Britain’s Queen Elizabeth, in 
Malaysia to close the Common- 
wealth Games in the capital, was 
given extra guards and police 
protection after protesters tried 
to storm Dr Mahathir’s residence 
nearby. 

Dr Mahathir had appeared to 
be putting off the arrest of Mr 
Anwar until the end of the Com- 
monwealth Games. 

But on Saturday, Mr Anwar's 
adopted brother and his former 
speechwriter were both sen- 
tenced to six months in prison by 
the sessions court after pleading 
guilty to committing acts of gross 
indecency by allowing them- 
selves to be sodomised by Mr 
Anwar. 

Mr Anwar yesterday adopted 
his highest-profile defence and 
took to the streets of the capital, 
first going to the National 
Mosque, where he swore his 
innocence. He then rallied a 


crowd estimated at between 
40,000 and 60,000 at Independence 
Square in the centre of the 
capital 

As the crowd broke up, some 
went to Dr Mahathir’s bouse, 
where the authorities fired tear 
gas and water cannons to dis- 
perse them before blocking off 
the road. Others went to UMNO 
party headquarters, where police 
said they damaged the building. 
Thousands went to Mr Anwar’s 
house calling “Long Live 
Anwar!” and “God is Great'’' and 
punching their fists in the air. 
Riot police quickly took up posi- 
tions before the arrest was made. 

Police also arrested an UMNO 
politician in connection with the 
disturbances. They said nobody 
was injured. Thousands of sup- 
porters remained with Mr 
Anwar’s wife at her home. Tm 
glad my husband was arrested as 
a hero." said Dr Wan Azizah. 
"Tm convinced my husband is 
Innocent" 

Public backlash, Page 4 



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WORLDmNEWS 

: EUROPE 

GERMAN ELECTIONS OPINION POLLS INDICATE MORE UNCERTAINTY ABOUT THE RESULT, WITH ALL STILL TO PLAY FOR IN TH E FI NAL WEEK 

Campaign tempo rises 
as Kohl narrows gap 


By Peter Norman in Bonn 

With Germany's leading 1 
politicians campaigning furi- 
ously for next Sunday’s fed- 
eral elections, the gap 
between the main parties 
has narrowed to such a 
degree that the usual statis- 
tical uncertainties of opinion 
surveys mean either could 
win. 

Three polling organisa- 
tions - Forschungsgruppe 
Wahlen (FGW), Emnid and 
Infratest /Dimap - have pub- 
lished projections for the 
September 27 elections show- 
ing that the lead of the oppo- 
sition Social Democratic 
party (SPD) has shrunk to 
between 2 per cent and 2.5 
per cent, within the 3 per- 
centage point margin of 
error for most polls. 

Last week's Bavarian elec- 
tion victory- for the Christian 
Social Union, sister party of 
Chancellor Helmut Kohl’s 
Christian Democratic Union, 
boosted support for the CDU 
C-SU, according to the poll- 
ing companies that con- 
ducted surveys after the poll. 

Although Gerhard Schrii- 


der. the SPD candidate for 
chancellor, remained more 
popular than Mr Kohl, his 
personal support slipped, as 
did Uiat of the SPD. FGW. 
putting SPD support at 39.5 
per cent, was the first poll- 
ing group to project SPD 
support below 40 per cent in 
the federal elections. 

However, the Bavarian 
poll and last week's contro- 
versy over whether the CDU/ 


Four-fifths of voters told 
FGW they considered the 
election outcome to be open, 
although 43 per cent gave 
the SPD the best chance of 
w inning , against 34 per cent 
tipping a CDU/CSU victory. 

All German polling compa- 
nies adjust raw survey data 
when compiling their polls 
of voter intentions. K3W 
alone publishes the unad- 
justed data on which its 


Coalition outcome hinges on fate of 
free-market FDP and ex-communists 


CSU plan to raise value- 
added tax have increased 
uncertainty among voters. 

FGW reported that only 71 
per cent of voters were sure 
which party they would sup- 
port; 13 per cent thought 
they could change their 
mind and 16 per cent were 
undecided. Infratest-Dimap 
found that 28 per cent had 
yet to decide their party 
preference or whether to 
vote - an Increase of 14 per- 
centage points in a week. 


projection Is based. 

In its survey of 1.290 vot- 
ers between September 14 
and 17. FGW found CDU/ 
CDU support jumped four 
percentage points to an 
unadjusted 38 per cent while 
the SPD dropped four points 
to 41 per cent. The environ- 
mental Greens held 
unchanged at 8 per cent. The 
market-oriented Free Demo- 
crat party (TDP) dropped one 
percentage point to 5 per 
cent and the former commu- 


nist Party of Democratic 
Socialism (PDS) also lost one 
point to 3 per cent. Support 
for other parties rose 2 
points to € per cent, with the 
Ear-right Republicans up one 
point to 2 per cent 

The performance of the 
PDS and FDP will be crucial 
in determining the coalition 
to emerge alter the election. 

It remains unclear 
whether the PDS can win 
the 5 per cent of votes nor- 
mally needed to enter the 
Bundestag, the lower house 
of parliament. But if it 
secures three directly elected 
seats in eastern Germany it 
would continue to send MPs 
to Bonn. 

That would almost cer- 
tainly deprive a putative 
coalition of SPD and Greens 
of a majority and force the 
creation of a "grand coali- 
tion" of SPD and CDU/CSU. 

The FDP, the junior part- 
ner in Mr Kohl's coalition, 
continues to teeter on the 
edge of exclusion from the 
Bundestag, which would 
mean the end of any hope of 
a return of the present gov- 
ernment. 



A demonstrator pokes fun at Kohl in Frankfurt on Saturday AF 

Opinion polls in Germany's genera! election canmaign 

. Atavvailng ttiequestfoni'^ow would ytxi voted meeteefionswre held next Sunday?* 
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38 (+1) 

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SPD 

39£ (-1.5) 

41 « 405 (-15) 

42 H) 

41.4 (+0Jf) 

Green 

•H 

BH OBI-OS) 

7 (+1) 

7.0 (-05) 

.TDP 

5J5(-fL5) 

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4F1) 

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Prodi braced for clash with far-left allies 


By James Blitz in Rome 

The Italian government is 
braced for a new clash with 
its far-left Marxist allies this 
week when it finalises the 
country’s budget for 1999. 

Romano Prodi, prime min- 
ister. believes he should be 
able to get broad support 
from his coalition partners 
for his latest budget, which 
will contain the smallest fis- 
cal squeeze Italy has seen in 
many years. However, his 
administration relies on the 
Reconstructed Communists 
(RC) for a majority in the 
Italian chamber of deputies. 
Last year, RC- temporarily 


brought down the govern- 
ment during the budget 
debate. 

After a string of annual 
budgets that have raised 
taxes in order to get Italy 
into the single currency, this 
year’s proposals will contain 
almost no tax-raising mea- 
sures and a fair number of 
concessions. 

However. Fausto Bertin- 
otti, leader of the RC. which 
is split on whether or not to 
attempt to bring down the 
government this autumn, 
yesterday continued to take 
a tough stance against the 
measures. 

"If what the government 


outlined to us last Wednes- 
day is its final offer, then a 
breakdown will be inevita- 
ble," he told La Repubblica 
newspaper. 

Fears that the annual bud- 
get debate in parliament 
could once again be the 
focus of conflict has led min- 
isters to say the document 
will be finalised at a cabinet 
meeting on Friday. 

The document to be 
approved by cabinet is to 
contain Ll3.5Q0bn (SS.lbn) of 
fiscal tightening, which the 
government deems sufficient 
to reduce the deficit to a tar- 
geted 2.4 per cent of gross 
domestic product next year. 


Despite the turbulence in 
financial markets, the Trea- 
sury is confident that public 
finances are in good order. 
One reason for that confi- 
dence is that the flight into 
government bonds in recent 
weeks has reduced the yield 
on Italian Treasury bills, 
bringing down the cost of 
servicing Italy's large debt' 

Instead, the task facing Mr 
Prodi this year is to con- 
vince Italians that the bud- 
get can stimulate economic 
growth. 

The Treasury forecast in 
April that the Italian econ- 
omy would grow by 2.5 per 
cent this year. Mr Prodi 


recently admitted that, in 
the wake of financial market 
turmoil, the growth figure 
would be around 2.0 per 
cent, one of the most slug- 
gish rates in Europe. 

Among the measures 
expected to be included in 
the budget are tax breaks for 
medium-sized companies 
that take on new staff in the 
south of Italy, where unem- 
ployment is double the 
national average of LL5 per 
cent. There will also be 
tax breaks for first time 
homeowners, while 60 per 
cent of the Euro tax - levied 
as a one-off tax to get Italy 
into the euro - will be 


returned to the public. 

The government has come 
under fierce criticism, .how- 
ever, for not trying to reduce 
the cost of its state pension 
scheme, the biggest burden 
on the spending side and the 
only vehicle for significant 
reductions in the tax burden. 

Mario Monti, one of Italy's 
two European Union com- 
missioners, said recently 
that “without pensions 
reform, fiscal pressure would 
actually increase". In his 
view, the growing number of 
elderly people in Italy is set 
to make the country less 
competitive unless reform 
takes place. 


On the right track 


British aid 
workers freed 
in Chechnya 



Better tracking 

We track the broader 
benchmarks closer than 
the competition. 

Broader coverage / 

We cover more of the L 
marketthan the competition. 

Better industry 
representation 

Comprehensive spread 
of industries from 
Pharmaceuticals to 
Transport. 

Now trading on 
Amsterdam Exchanges 
and LIFFE 

FTSE Eurofoo 100 and 300 
enaoie :nvss!cr$ to 'race 
Europe m ere easy 

ra^sacimn 


Two British aid workers 
abducted in the breakaway 
Russian region of Chechnya 
were freed yesterday after 
more than a year in captiv- 
ity, Reuters reports from 
Moscow. 

Camilla Carr and Jon 
James, who appeared in 
good health after their 15- 
month ordeal, made a short 
stop in Moscow on their way 
to Britain. 

In July 1997 half a dozen 
people in masks abducted 
Ms Carr and Mr James in 
the Chechen capital of 
Grozny, where they worked 
for a Russian organisation 
called the Centre for Peace- 
making and Community 
Development, helping chil- 
dren caught up in the 1994-96 
war in the mountainous 
southern region. 

Ms Carr and Mr Jones, 
who were dressed in worn 
clothes and carried their 
belongings in plastic bags, 
said they moved at least 14 
times during more than a 
year of captivity. 

“During the first seven 
months we had very little 
food," Ms Carr told a news 
conference at Moscow’s 


Sheremetyevo airport. "We 
were in different places, usu- 
ally in cellars. 

"We had very little space 
and little light and some- 
times the temperature was 
pretty awful." she added. 
"We spent one month in 
40°C." 

Sir Andrew Wood, the 
British ambassador who wel- 
comed Ms Carr and Mr Jones 
in Sheremetyevo, said Boris 
Berezovsky, a Russian busi- 
nessman. played a key role 
In winning the release of the 
aid workers. 

Mr Berezovsky arrived in 
Moscow on the same aircraft 
as the two freed captives. 

Sir Andrew said Ms Carr 
and Mr Jones were due to 
take a private aircraft later 
yesterday to Brize Norton, a 
British Royal Air Force base. 
He said Britain did not pay a 
ransom for Ms Carr and Mr ! 
Jones, but did not elaborate 
further. 

Hundreds of hostages, 
including several foreigners, 
are currently held hostage 
by criminal gangs in Chech- 
nya. which was devastated 

by the war. 


NEWS DIGEST 


MILAN /PRUNES DISPUTE 


Italy iswamed not to use 


V-/- 


pressure er airport 

to an expanoekfMtei aS^funder a controversi 


NeN warned 

Italy airlines 1o move 

to an expandedrMi^i airp^funder a controversial plan 
vetoed by iasfcweek would be illegal. 

"The Cot£fflissto$i ; tias takefijts 'decision and I expect 
the Italian wrfhorttfcaito abwafcy'if,’ Mr Kinnock wrote in 
the Corriere'deRa;Sera.,{telfy i ,7‘:£’i. -V 
They know thatrany-'tfteasike, to exp^ airfines from Un- 
ate (the existing Mllem aWporfjjwc^jhl be Illegal" he added. 

State-owned Italian carrier Alitalia ■complained on Satur- 
day that rivals were Unate in defi- 

ance of the goverinrrierit pI*i r to^vf^aktSt5fe' but tfie 
Milan-Rome route to the Octo- 

ber 25. Unate is 15 minutes from" die- city centre; while 
Malpensa is more than an hour's trek along a busy com- 
muter road. - .*• • - • . ■ 

Alitalia has nevertheless written to the EU competition 
department, the Italian anti-trust, watchdog and the trans- 
port ministry to demand immediate action Or sanctions on 
airlines who are continuing to sell Linate fifghts past Octo- 
ber 25. Nine airlines, including British Airways, Germany's 
Lufthansa and Air France had complained that the sudden 
shift to Malpensa gave Alitalia an unfair advantage. They 
have vowed to stay at Unate. Reuters, Rome 


ALBANIAN UNREST 

Protest over Hajdari killing 

About 3,000 opposition Democratic party supporters 
marched yesterday to a cemetery outside the Albanian 
capital to protest over the killing last week of a leading 
party figure, Azem Hajdari, and his bodyguard. 

The peaceful rally marked the sixth consecutive day of 
protests called by opposition leader and former president 
SaJi Berisha, who blames Socialist prime minister Fat os 
Nano for the killings. 

Tirana saw its worst violence in 18 months last week fol- 
lowing the killings. Mr Nano's Socialist- led government has 
accused Mr Berisha of attempting a coup during the vio- 
lence. On Friday, parliament lifted Mr Berisha's immunity 
from prosecution to open the way for his arrest 

The supporters, waving flowers and pictures of Hajdari, 
walked from Tirana's main Skanderbeg Square towards 
the cemetery on the fringes of the capital. They shouted 
anti -govern merit slogans. Reuters, Tirana 


BERLIN AIRPORT AUTHORITY 

Hochtief consortium in bid 

A consortium lead by Hochtief, the German construction 
giant and the Swiss-Swedish engineering group ABB, has 
emerged as the favoured candidate to take over the Berlin 
Brandenburg airport authority (BBF). 

The consortium, which also includes the Frankfurt airport 
authority and BankgeseJIschaft Berlin, a big local bank, is 
believed to have bid at least DM650m (S383m) for BBF, 
which is owned by the city of Berlin, the state of Branden- 
burg and the federal government. 

The owners of BBF said they would now enter into 
detailed negotiations with the Hochtief consortium with the 
aim of signing a joint letter of intent within the next few 
weeks. 

The final stage of the sale pitched the Hochtief consor- 
tium against a group made up of rVG, a German industrial 
holding company, the Paris and Vienna airport authorities, 
Commerzbank of Germany and the French bank Caisse 
des Depot Frederick Studemann, Berlin 


AZERBAIJAN 

Demands for Aliyev to quit 

About 10,000 opponents of Haydar Aliyev, the Azeri presi- 
dent marched through the streets of the capital Baku yes- 
terday, demanding he release detained political detractors 
and resign from office. 

Hundreds of riot troops carrying plastic shields sur- 
rounded a small square where opposition political parties 
gathered, and lined every step of the route of the protest- 
ers’ march. 

The protest was called by about a dozen political parties 
which are boycotting the October 1 1 presidential election. 

They say Mr Aliyev’s control over the country's Central . 
Elections Commission will allow him to commit fraud, if 
necessary, to stay in power. Reuters, Baku 


VATICAN 

Bank founder beatified 

Pope John Paul yesterday beatified a 19th century Catho- 
lic entrepreneur and politician who founded the Banco 
Ambrosiano. which 86 years later would thrust the Vatican 
into its worst financial scandal. 

Giuseppe Tovini, who died in 1897 at the age of 57. 
founded two banks closely linked to the Church. One was 
the Banca San Paolo in Brescia, founded in 1888, and the 
other was the Banco Ambrosiano, founded in Milan in 
1896. 

By 1982, the Ambrosiano had grown to become Italy's 
largest private bank. When it collapsed under the weight of 
S1.3bn of bad debt, creditors accused the Vatican Bank of 
being responsible for the bankruptcy. Reuters, Brescia 


Abortion vote set to test Aznar 


By David White In Madrid 

Spain's centre-right 
government faces a test of 
its parliamentary strength 
this week when it tries to 
head off an opposition bill to 
relax the country's abortion 
law. 

The abortion debate comes 
awkwardly at a time when 
Jose Marfa Aznar, the prime 
minister, is seeking to 
revamp his Popular party's 
conservative image and proj- 
ect it as a “centre reformist’’ 
movement. 

The vote will be a clifEhan- 
ger following three consecu- 
tive tied votes on a similar 
bill in February. The out- 
come will depend on the 
Popular party's regionalist 
allies, which hold the bal- 
ance of power in parliament 
Being partly of Christian 
Democrat orientation, these 
parties are split on the issue, 
and have allowed their mem- 


bers a free vote. 

Spain’s Roman Catholic 
Church hierarchy has 
rejected the bill as “radically 
Immoral". In a pamphlet 
entitled “A yet wider licence 
to kill children", the Episco- 
pal Conference claimed the 
proposed changes would vio- 
late Spain’s constitution. 

"A C-atholic politician 
could never vote for this 
law," said its chairman, 
Elias Yanes. 

The Church fiercely 
opposed Spain's original 
abortion legislation, which 
came into force under a 
Socialist government in 1985, 
The law was amended after 
an appeal by conservatives 
to the constitutional court. 

Spain currently permits 
abortion on grounds of rape, 
foetal malformation and dan- 
ger to the mother's physical 
or mental health. The last 
provision covers almost 98 
per cent of abortions per- 


formed in Spain. Socialist 
attempts to liberalise these 
provisions further were 
defeated two years ago in 
one of the first parliamen- 
tary tests for Mr Aznar’s 
minority government. 

The new Socialist bill 
would add a clause legalis- 
ing abortion in the first 12 
weeks of pregnancy when 
the mother, in her own judg- 
ment, faces a risk of serious 
“personal, family or social 
conflict” by continuing with 
the pregnancy. The Commu- 
nist-led United Left and its 
New Left offshoot have also 
tabled bills to extend the 
legal period - to 16 weeks in 
the Communist proposal - 
and explicitly bar medical 
centres from assuming the 
right to authorise or deny an 
abortion. 

The Popular party has 
promised not to go back on 
the original law but says tt 
is not necessary to widen it. 


financial times 

Mitalicd te The Financial Tune* (Europe) 
utnbH, NibdunEcnphu ?, 603 IS Frank- 
Tun am Mam, Germany. Telephone ++49 
n 9 156 Sift Fu ++49 ffi ftf, i«l. Renee- 
sorted m Frankfurt by } Walter Brand. 
Cbua A. Kcnnard s Geacbaftsfihrer ud 
in London by David C.M Bed riuimnn 
and Alan C Miller. Deputy Chairman. The 
shareholder or the Financial Tines 
(Europe! GmbH is Pearson Overs™ Hold- 
ings Lnmied. 3 Bnrlinpon Gardens, ban- 
doo. WJX ILE. Shareholder or this 
company is Pearson pic. legetered at the 
nine address 
GERMANY: 

Responsible fw_ Advmmnj conienr Cofin 
| A. Kcnnard Printer. H&myet InUfnSDoml 
VcrUpgeselfsrfiafi mbH. Admiral-Roien- 
d f5 l ; 3a. 61263 Neu Ucnbuic ISSN 
ill .4 7W. Responsible Editor. Richard 
Lambert, do The Financial Thae> Limned, 
Number One Southwark Bridge. London 
SEI 9HL 

FRANCE: 

Publishing Director P. M.irnS rfh 41 Ri* 
PARIS. Telephone (01) 
Mb 8254 Fa (Oil 5376 *253. Pnnier 
SA Nard Eclair. IJ/21 Rue de Caire, 
F-J9I00 R outvie Cedea l. Editor Richard 
Lambert ISSN 1 14*. 2753 Comnussiod 
Pamaire No 67SKD. 

SWEDEN: 

Responsible Pubhster. Bradley P Johnson. 
TdopHone +46 g 791 2345. Pm^-, *a 
E* preset, PO Bor 6007. 
5-550 06. Jinkiprug. 

<0 The Financul runes Limited |WS 
Editor. Richard Lambert do The Financial 
Tme Lamed. Number One Southwark 
Brake. London SEI 9HL 
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Anth°ny Robinson steps through the looking glass into the Alice in Wonderland domain 
of moribund factories that have survived on barter and are now hoping for fresh money 


T he 1,000km flight east 
from Moscow to the 
Industrial cities of the 
Volga region takes visitors 
through Alice's looking glass 
into the topsy-turvy wonder- 
land of the post-Soviet “real 
economy" - a surreal place 
that has survived the last 
decade by barter and non- 
payment of taxes, suppliers 
and workers. 

This is the economy whose 

re-in vigoration is a declared 
priority of the new Soviet 
government 

Here in the industrial 
heartland of Russia - in the 
string of towns and cities 
from Nizhny-Novgorod in 
the north through Saratov 
and Volgograd to Astrakhan, 
where the Volga river flows 
into the Caspian Sea - the 
prospect of looser monetary 
policies and a government 
more sympathetic to indus- 
try inspires hope rather than 
fear that Russia is about to 
take a step backwards to 
central control and economic 
planning. 

In Saratov, a lively 
regional capital, no one from 
the populist and reformist 
governor, Dimitri Ayatskov, 
to the genera] director of the 
virtually bankrupt trolley 
bus plant expects or believes 
that Russia can or will 
return to the Soviet past. 
But Lenin’s words about the 
occasional need to take one 
step backwards in order to 
move two steps forward" are 
on many lips. 

The directors of the mori- 
bund industrial giants of the 
Soviet era are busy phoning 
old contacts to make sure 
that if fresh money is made 
available, some at least will 
come their way. 

"The question now is how 
much new money will be 
made available and who will 
decide how much goes to 
whom," says the director of 
a foreign -owned plant who. 
like many in the private sec- 
tor, fears that the new and 
as yet unformulated policy 
will simply result in higher 
inflation and pay -offs among 
old cronies. 

Among those looking for- 


ward to the changes are the 
managers of former military 
plants h umili ated by what 
they see as the "primitivlsa- 
tion" of high-tech sectors of 
the economy. 

The loss-making Saratov 

aircraft factory, which used 

to produce jump-jet fighters 
for aircraft carriers as well 
as the triple-engined Yak-42 
passenger aircraft, is a typi- 
cal example. 

Since 1992 when "market 
reformers" led by Yegor Gai- 
dar and Anatoly Chubais cut 
the military budget by SO per 
cent overnight, military 
plants either have closed or 
have been stripped down. 

Condemned to struggle to 
survive like the rest of the 
orphaned Soviet economy, 
former military plant direc- 
tors have also reverted to 
the barter economy which 
has proved practically 
impervious to the collapse of 
the Moscow-based banking 
system. 

This is an economic sys- 
tem which makes perfect 
sense to those brought up 
within the closed logic of the 
Soviet command economy 
but has little in common 
with a market economy as 
understood in the rest of the 
world. 

Alexander Yermishin, the 
gravel-voiced director of the 
Saratov aircraft plant, would 
develop a civilian vertical 
take-off aircraft if only he 
had the roubles. 

A scale model looking like 
a flying saucer, gathers dust 
in one of the factories. It sits 
alongside a motley collection 
of work in progress - includ- 
ing three half-finished train- 
ing aircraft of a new design 
and big red combine harvest- 
ers being assembled for the 
US agriculture equipment - 
company. Case. 

In the next hall of the vast 
complex, which used to 
employ 8,500 skilled workers, 
five triple-engined Yak-42D 
are being slowly put 
together for cash-strapped 
Russian airlines that pay 
when they can. 

But with Asian and Latin 
American economies now in 



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KAZAKHSTAN 



'•_X 


crisis and the rouble deval- 
ued, Mr Yermishin is opti- 
mistic that the plant will 
now be able to win new 
export orders for an aircraft 
that first flew in 1974. 

It has been re-engined and 
modernised and is on offer at 
$25m compared with the 
$38m which the director 
believes is the price of an 
equivalent Boeing 737 or Air- 
bus 319- 

The problem is that at this 
price range the Yak faces 
tough competition from rival 
Russian manufacturers, 
especially Tupolev, which is 
building a new model of 
comparable size. 

Restructuring has hardly 
started in the Russian aero- 
space sector. 

As European and US com- 
petitors merge, the Russian 
aircraft industry struggles to 
maintain five rival design 
and construction companies 
- Ilyushin, Tupolev, Mig, 
Sukhoi and Yak. 

But it is at the TroLza trol- 
ley bus foctory. across the 
two-mile- wide Volga river in 
Saratov's sister-town of 
Engels, that the problems 
and survival strategies of 
the post-Soviet “real econ- 
omy” can be seen at their 
cJearest 

In Soviet days the sprawl- 
ing plant was a near-monop- 


oly supplier of trolley buses 
across the entire Soviet 
Union. It produced more 
than 2,500 rugged vehicles a 
year with barely a modifica- 
tion. 

Over 30 years the state for- 
eign trade company sold 
more than 3.000 vehicles 
abroad in markets as diverse 
as Vietnam and Chile. 

Athens now needs to 
replace the 350 models It 
bought over a decade ago. 
Cash-strapped Belgrade is 
also hoping to "buy” 40 
vehicles. 

In practice payment will 
come in the form of red pep- 
pers and whatever else the 
struggling Serbian economy 
can come up with in barter 
over the next 10 years. 

But the plant's main hope 
for salvation lies in its abil- 
ity to raise the 98m it needs 
as working capital to start 
work on a $2Sm contract to 
supply 230 trolley buses to 
several Russian cities 
financed by the World Bank. 

For the last decade Trolza. 
a virtual industrial museum 
of lovingly cared-for East 
German presses and solid 
Soviet lathes a kilometre 
long, has just ticked over, 
producing around 120 
vehicles a year in return for 
potatoes, cables and what- 
ever could in turn be bar- 
tered for goods needed to 
"pay" workers, who are 
mainly at home. It is harvest 
time now and workers are 
being paid with potatoes. 

"In the old days the minis- 
try for public transport in 
' Moscow ordered trolleys 
from us and sent them to 
cities across the Union," said 
Nikola Folyulak, the plant's 
director and also the biggest 
shareholder. 

"But when Goxplan and 
the whole planning system 
disappeared, local govern- 
ments were made responsi- 
ble and none of them has 
any money. How could they, 
when 80 per cent of passen- 
gers have permits to travel 
free and the factories that 
needed public transport to 
get workers to work are 
closed?" 



A youth pears through a wall of pho to gra ph s of Eta prisoners during a demonstration in Bahaa on 
Saturday. Ha recently announced a ceasefire in its fight for Basque independence 


A P 


Madrid determined to 
keep pressure on Eta 


By David White ai Madrid 

The Spanish government has 
made clear it intends to keep 
up police pressure against 
the Basque separatist group 
Eta and wants to avoid being 
hurried into making a con- 
crete gesture in response to 
the Eta ceasefire announced 
last week. 

Jaime Mayor Oreja, inte- 
rior minister, said tbe state 
could not declare a truce in 
return for the initiative and 
would arrest Eta units if it 
could. Eta still bad to prove 
Its goodwill both before and 
after the Basque country's 
October 25 elections, he said. 
Judicial actions against 
Eta’s funding network would 


meanwhile continue. 

The daily El Mundo said 
that despite official scepti- 
cism. Eta's leadership 
planned to keep the ceasefire 
intact while seeking a politi- 
cal solution to the 30-year 
conflict that has claimed 
more than 800 lives. 

El Mundo's source, whose 
comments the paper said 
reflected the views of Eta's 
hierarchy, was quoted as 
saying: "When you declare 
an indefinite, unilateral 
truce without conditions, 
you can't back out of it the 
following month.” 

Jose Marla Aznar, prime 
minister, returning a day 
early from a Latin American 
trip, discussed the Basque 


outlook over tbe weekend 
with King Juan Carlos and 
senior ministers, ahead of 
inter-party consultations due 
to start this week. A spokes- 
man for the royal family said 
the king, who rarely meddles 
in politics, had been in per- 
manent contact with govern- 
ment officials since Eta 
announced its ceasefire. 

A snap poll in the daily El 
Pals showed Basque resi- 
dents much less sceptical 
about the ceasefire than 
people in the rest of Spain, 
57 per cent of whom thought 
it was a "trap". By contrast 
59 per cent of Basques inter- 
viewed believed it was sin- 
cere and 73 per cent greeted 
the news with optimism. 


Moscow 
and Kiev 
forge 
new links 

By Charles Clover bi Hav 


Russia and Ukraine have 
agreed to set up a joint anti- 
crisis committee and pledged 
to redevelop lost trade links. 
In a sign that the economic 
crisis buffeting the two 
countries is bringing them 
closer together. 

"We are guilty of the fact 
that when this started, we 
should have gathered 
together. And because of 
this, so far, each has been 
dying separately,” said Leo- 
nid Kuchma. Ukraine's presi- 
dent. after meeting Boris 
Yeltsin, president of Russia, 
at the weekend. "We have 
agreed to be together, one 
for the other." 

Last week. Mr Kuchma 
announced that the “best 
way out” of the region's eco- 
nomic crisis would be for 
Ukraine to enter a free trade 
zone with Russia and other 
countries of the Common- 
wealth of Independent 
States. He implied that any 
such free trade zone would 
replace a customs union cur- 
rently in place between Bela- 
rus. Russia. Kazakhstan and 
Kyrgyzstan, 

Ukraine has spent much of 
its short history as an inde- 
pendent state since 1991 try- 
ing to distance itself from 
350 years of Imperial rule by 
Russia. But over the past 
year and a half, Kiev has 
showed willingness to 
deepen co-operation with its 
neighbour. 

In May 1997. the two coun- 
tries signed a treaty of 
friendship, while in Febru- 
ary. they signed an agree- 
ment designed to more than 
double trade over the next 
ten years. But with both fac- 
ing financial meltdown, this 
growing interdependence 
appears to be taking on a 
new character. 

Trade between Ukraine 
and Russia totalled some 
tlTbn last year. 40 per cent 
of Ukraine's total, and 15 per 
cent of Russia's. Ukraine 
imports over half of its pri- 
mary energy from Russia, 
mainly natural gas and oil 
products, much in demand 
as winter approaches. 




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4 


FINANCIAL TIMES MONDAY SEPTEMBER 21 1998 


ASIA-PACIFIC 


INDONESIA N MNKING_GOVERNMENT DECISION T0DAY0_N CHA RGES A GAI NST OWNERS W HO BROKE LEGAL LIMIT S ON LOAN S TO THEMSELVES 

Doubts oyer Jakarta bid to recoup $12 



5 ?*!? Tbooras hi Jakarta 

The Indonesian government 
Hopes to recover some of the 
$12L5bn lent to failing hanks 
today and may start prose- 
eating fraudulent hankers. 

But analysts say little can 
be recovered and predict the 
more important rhangg will 
be a removal of legal obsta- 
cles to restructuring hanks 

The attorney-general's 
office said it would decide 
today whether to press 
charges against bank owners 


who broke legal limits on 
lending to themselves, and 
indicated it would get tough 
on any banks which failed to 
repay their share in 
Rpl50,000bn ($12 ^bn) in cen- 
tral bank credits to ailing 
banks. 

The government has also 
told the Salim family, which 
owned Bank Central Asia 
(BCAtfolntly with two chil- 
dren of former president 
Suharto, that they could 
regain a minority stake if 
they paid back Rp30.000bn in 


credits or lose all rights to 
the country’s largest private 

hank. 

If officials produce results 
today it would mark a sec- 
ond step in banking reforms 
following the closure of 
three banks and nationalisa- 
tion of Bank Danamon, the 
second largest private bank, 
last month. The government 
had closed 23 banks earlier 
in the crisis and stepped up 
supervision of 48 others but 
did little to address their 
liquidity problems. 


Few expect serious legal 
action against delinquent 
batik owners, inrinding chil- 
dren and close friends of Mr 
Suharto, as many of them 
have dose links with senior 
officials in the new govern- 
-inent. “They'll just say the 
banks did what was 
required,” said Umar Juorc, 
an economist. “If they bring 
the bankers to court they 
bring themselves to court hi 
the end they'll put one or 
two people in jail but they 
wQl procrastinate first” 


Sjahrfl Sablrin, the c entr al 
bank governor, said last 
week that owners had 

already returned Rp70,000bn, 

including more . than 
Rp20,000bn from the S alim 
family. But he would not say 
how .much was cash and 
how much was a pledge of 
assets. 

Some . bank officials .said 
they planned only to formal- 
ise a pledge of all their 
assets, made earlier this year 
in return for central bank 
'support That would remove 


legal obstacles to transfer- 
ring bank assets to a .new 
government asset manage- 
ment unit Without such a 
"formal pledge minority 
shareholders could claim 
expropriation and sue. 

Most of the -transferred 
assets would be the loan 
portfolios, much of It bad 
. debt and property. .Some will 
offer shares in enterprises 
they own, but many compa- 
nies have more debt than 
. assets and shares are often 
pledged to other creditors. 


The government 'promised' 
the International Monetary 
Fund that it would finalise 
plans for restructuring and 
recapitalising' .Danamon, 
BCA and two smaller banks 
by the end of this month, 
including the sale of shares 
in BCA and possibly Dana- 
mon to foreign investors. 

it also promised. _a long- 
awaited plan for saving a 
handful of large banks that 
are still liquid but face nega- 
tive spreads because of high 
interest rates. ■ 


Mahathir underestimates the 
power of public backlash 

Strength of support for his sacked deputy forced the premier to 
act during the Commonwealth Games. Sheila McNulty reports 


W hen Mahathir 
Mohamad sacked his 
deputy and political 
rival, Anwar Ibrahim, earlier 
this month, be clearly never 
expected a significant public 
backlash. 

But the heckles or a few 
hundred ardent Anwar sup- 
porters metamorphosed in 
barely two weeks into a 
gathering of 40.000-60,000 
Malaysians in Independence 
Square yesterday demanding 
reform. 

It was too much. Riot 
police dispersed the crowd 
with water cannons and 
tearga6, broke into Mr 
Anwar's house and arrested 
him . 

Normally, Malaysians 
refrain from openly discuss- 
ing the country’s leadership. 
Students are forbidden to 
engage in politics. Few dare 
criticise their prime minis- 
ter, who tolerates little oppo- 


sition. Yesterday evening in 
Kuala Lumpur normally reti- 
cent Malaysians had bra- 
zenly pushed past dozens of 
riot police around Indepen- 
dence Square to hear Mr 
Anwar shout through a 
megaphone to defend him- 
self against allegations or 
sodomy and treason. 

It was an embarrassing 
position for Dr Mahathir 
near the square, Britain's 
Queen Elizabeth II was 
attending the Anglican 
cathedral just hours after 
arriving for one of the most 
Important international 
events ever staged In Malay- 
sia - the Commonwealth 
Games. 

“Malaysians have waited 
long enough. We have given 
Dr Mahathir enough time,” 
Mr Anwar shouted. “Enough 
is enough. Dr Mahathir 
should resign. Resign now. 
Save Malaysia." 


“Resign Now,” the crowd 
shouted. “Reform.” 

Dr Mahathir had refrained 
from arresting Mr Anwar for 
the past two weeks, 
although he remarked that 
he was breaking a law that 
bars more than three people 
gathering without a permit. 

It was clear he did not 
want to detain his former 
deputy until the Common- 
wealth Games had ended 
and the Queen left on 
Wednesday. He wanted to 
avoid unrest with the eyes of 
the world watching. The 
games are Malaysia's com- 
ing-out party and Dr 
Mahathir was committed to 
ensuring they were a suc- 
cess. So. even as Mr Anwar 
rallied Malaysians by the 
thousands, police confined 
themselves to issuing park- 
ing tickets to those parked 
Ille gall y around his home. 

But the prime minister 



Taiwan 



merger 
of three 
banks 

By Laurence Eyton in Taipei 


Anwar mid Ms wife. Wan Azizah, appear before supporters In Kuala Lumpur yesterday 


miscalculated the tenacity of 
the crowd. His supporters 
expected it would quickly 
disperse when the games 
began. Instead, the pressure 
became more intense. 

Every night, thousands of 
Malaysians - Malay, Chinese 
and Indian - gathered at the 


to him angrily denounce the 
government that cast him 
out. He insisted he was 
being framed for becoming 
Dr Mahathir’s only political 
rfvaL 

“He picked the wrong 
guy,” Mr Anwar shouted 
angrily, vowing to defend 


free. He even joined a rally 
with the head of the parlia- 
mentary opposition. Lim Kit 
Slang. 

The crowds outside his 
home quickly grew to 10,000 
and Mr Anwar erected a 20- 
foot tall television screen so 
everyone could hear him 


home of Mr Anwar to listen himself as long as he was speak. Hawkers sold soy 


milk in tubs marked refor- 
masi, or reform. People 
snapped up tapes of his 
speeches. ' ~ • 

As the' authorities kept 
their distance, waiting for 
the Queen to come and go, 
Mr Anwar seized the oppor- 
tunity to travel to the coun- 
tryside, where he drew tens 
of thousands at each stop, 

On Saturday two men - 
Mr Anwar’s adopted brother, 
Sukma Darmawan, and his 
former speech writer, Muna- 
war A. Anees - were each 
sentenced to six months in 
jail by the Sessions Court 
after pleading guilty to com- 
mitting acts of gross inde- 
cency by allowing them- 
selves to be spdomlsed by Mr 

Anwar 

He has denied the allega- 
tions and said he was framed 
by his opponents. 

Undeterred, the crowd rai- 
ded to Mr Anwar's side yes- 
terday In Independence 
Square. Dr . Mahathir was 
finally forced to act. 

“A lot of people still don't 
believe the charges," said 
Fan Yew Teng, a writer and 
social activist. “It looks like 
this problem is not going 
away, and they [the authori- 
ties] are plainly worried. 
They want to contain it" 




i 

WITH INVESTORS 

Our earnings growth should continue 
at an above-average pace.” 



Telecom pay cut 
plan in HK 
sparks protests 


INTERVIEW WITH DR. MICHAEL WIT2EL, MEMBER OF THE BOARD OF MANAGEMENT 
RESPONSIBLE FOR THE NATURE PRODUCTS DIVISION 

Dr. Wtczd, what future do you envisage for natural products? For SKW, a highly promising one In view of their excellent potential in global - 
markets and our strong competitive position, or course, having the right product portfolio combined with a high level of innovation Is docisive 
for uur success. Our mix of the two is the right one. 

What are your goals now that SKW BI05Y5TEMS -acquired in 1 99S - has been restructured and already achieved a turnaround? Our structure 
is now uptimal. we have quality management, and in all live business units we enjoy strong competitive positions which will be further en- 
hanced. Our development rates, fur new and better products remain high. Our market shares are expanding in our most important markets - 

the food, photographic and chemical-pharmaceutical Industries. In this division as a whole, we are 
continuously reducing and containing costs. In 1998, we should again post above-average results 
from operating activities, that is. double-digit percentage growth already achieved In 1997 when we 
reached DM % million on sales of DM 1 .5 billion, ir not for tax options exercised in 1997, earnings 
would have been DM 25 million higher. 



In which areas are you most strongly competitive? We are the world's largest gelatin producer 
and our Texturant Systems rank prominently in international markets. Our other business units 
are poised for strong growth, and we plan tri boost them into leadership positions as wdL 

How are you developing your five business units? In Gelatin & Specialties, we are strengthening our 
top ranking globally; our majority-owned joint venture in China is doing welL Our comprehensive 
Texturant Systems product lines are highly attractive to the food industry, and this unit's leading 
position can certainly be expanded. Focused nn beverages, dairy products and confectionery as well 
as our unique CO ; extraction, the Flavors & Fruit Preparations business unit is constantly growing, 
reaching higher productivity and proDtablility. In Cultures & Enzymes, particularly cultures for cheese 
production where we are the market leader and probiotic yogurt cultures in line with new trends in 
nutrition, we have a solid position with promisinggrtmlh potential. In our Salt Products business 
unit, a reliable and profitable pillar of our business, there is scope for further earnings improvement as a consequence of sweeping reorganization. 


Dr. Mich. 1C I Witzol 

Mcrnt>*r of tho Doiirtf of Mnnnflcmcnt 
Rciponiiblc for the Nature Product* O 


Those are the bets. How do you see die future? In the years to come. I expect sales to rise u DM 2.5-3 billion with earnings growth outpacing 
sales increases, reflecting our rationalization measures. This size will give us the economies of scale of a global player. Backed by innovative 
power, we want to be the undisputed market leader as a producer, supplier and partner for nature- based products. And our further strength- 
ened nimniitment in satisfying client requirements specially in die food industry will be supported by our worldwide Food Service Center 
Network. 

What are your acquisition plans? Tu a large extent, uur growth should be achieved organically. In a rapidly changing competitive environ- 
ment. however, we are naturally preparing ourselves for external growth such as cooperation ventures and acquisitions but only if there is a 
sensible Gt at reasonable conditions. In any caso, the Nature Products Division will continue to develop within a balanced, low-risk structure 
in tandem with SKW's other two divisions, Chemicals and Construction Chemicals. 


SKW TronfacrgAG. Corporate Gom mu ntcadogs 

P.O. Box 1262, D-83303 Itostberg, Germany 

telephone (+49) 86 21 186 -24 60. telefax (+49) 86 21/86-20 20 

Internet; htxprf/www.ikw.dc 

e-mail: skw__gro up_p r@ co mpute rwe.com 

Member of the YIAG Group 


SKW 

TR0STBERG 


By Louise Lucas In Hong Kong 


Workers at Hongkong 
Telecom are planning a ban 
on overtime today, following 
a weekend of street protests 
and petitions against the 
group’s proposals for a 10 
per cent pay cut 

The clash, which pits one 
of the territory's biggest 
employers against the hulk 
of its 13,800 workers and 
raises the prospect of strike 
action at the dominant tele- 
coms operator, could set pre- 
cedents as recession deepens 
in Hong Kong. So far, only a 
handful of companies have 
attempted to cut wages. 

“People know very well 
that being a company with a 
profit of over HKtlObn 
($L3bn), [Hongkong Telecom 
is] really leading the way for 
other employers to follow 
suit, especially other not so 
profitable employers,” said 
Lee Cheuk-yan. a member of 
the legislative council. 

Hong Kong's maintenance 
of its fixed exchange rate 
regime has effectively deval- 
ued assets instead - both 
property and the stock mar- 
ket have seen their value 
halved from the : peaks last 
year - but other business 
costs bave proved less flexi- 
ble. 

For companies faced with 
weak demand, especially 


those serving clients in Asia, 
cost-cutting so far has cen- 
tred on redundancies. Last 
Thursday, shortly before 
Hongkong Telecom travelled 
its pay cut plan, the govern- 
ment said unemployment 
had reached a 15-year high 
of 5 per cent 

Unemployment benefits 
are minimal and there have 
already been concerns that 
the growing unemployment 
rate mil hit banks with a 
rise in mortgage defaults, 
which are now tiny. 

The Hongkong Telecom 
dispute could also have ram- 
ifications for the territory’s 
industrial policies. 

Hongkong Telecom's inter- 
national direct dialling 
monopoly was' terminated 
prematurely as part of 
efforts to liberalise the tele- 
coms sector. , 

The government is due to 
announce next month 
whether or not .it will award 
new fixed-line licences; exist- 
ing operators bave made 
clear their objections to 
expanding competition in 
the current market. 

No netheless, analysts had 
thought' Hong Kong would 
stick with its pro-co mpeti 
tion reputation and award 
more licences. In the present 
climate,, that now looks 
increasingly unlikely. 


Taiwan’s legislature is to 
consider a proposal to pro- 
mote a merger between the 
Island's three biggest com- 
mercial banks, Chang Hwa 
Commercial Bank, First 
Commercial R»«k and Hua 
Nan Commercial Bank. 

A new merged bank would 
have assets of T$3,160bn 
(US$91. 5bn), putting it 

among the world’s 90 biggest 
banks. 

It would rank 22nd in size 
in Asia and would be almost 
twice the size of the Bank of 
Taiwan, currently the 
island's biggest financial 
institution. 

A recent spate of bank 
mergers in the US has 
prompted the idea of creat- 
ing a large Taiwan bank- 
Tremendous savings could 
be made on costs by merging 
the three, whose businesses 
largely overlap. In addition 
their, combined assets would 
make the new bank a big 
regional, perhaps interna- 
tional, player. 

The merger will be for- 
mally proposed in the legis- 
lature on Wednesday by Lin 
Wen-lang, an apposition 
member. 

All three banks involved 
are listed on the Taiwan 
Stock Exchange but their 
original owner, the Taiwan 
provincial government, 
remains their biggest share- 
holder. retaining a 42 per 
cent stake in First Commer- 
cial, a 41 per cent stake in 
Hua Nan and a 30 per cent 
stake in Chang Hwa. 

The provincial govern- 
ment is. however, due to he 
abolished in its current form 
on December 25 this year, 
after which its assets will 
pass to the central govern- 
ment. With the legislature 
giving impetus to merger 
discussions, the attitude of 
the Ministry of Finance 
towards the merger will be 
crucial. 

A ministry statement on 
Saturday said that it would 
support the merger if it 
gained the approval of the 
managements and share- 
holders of the three banks. 

The local stock market 
showed its enthusiasm for 
the merger on Saturday 
when rumours of Mr Lin’s 
proposal turned around sen- 
timent. which has been bear- 
ish all week. 

The market saw a 2.7 per 
cent rise on Saturday, with, 
the shares of all three banks 
involved hitting the mar- 
ket's 7 per cent daily upward 
limit. 

The three banks said on 
Sunday that the matter was 
up to their shareholders to 
decide, but a merger would, 
in any case, take a long time 
to negotiate. 

Hua Nan has a sharehold- 
ers' meeting on Thursday 
while the other banks both 
bave shareholders’ meetings 
□u October 17. The merger is 
not on the agenda of any of 
the meetings but is likely to 
be discussed. 

The proposal has gener- 
ated strong opposition from 
employees of the banks and 
their unions. 

Currently all three banks 
have around 130 branches 
and between 6,000 and 7,000 
employees. A merger is 
likely to result in the closure 
of more than 100 branches 
and the loss of at least 7,000 
jobs. 


Pressure growing on 
Asia’s welfare states 


By Mctofas Timmins, 
Puttie PoBcy Editor 


Many of Asia's low-spending 
welfare states - often cited 
by commentators in the mid- 
1990s as a potential model 
for the west - are under 
severe pressure and unlikely 
to be sustained, according to 
a study from the London 
School of Economics, 

Public spending on social 
welfare, ranging from health 
to benefits, accounts for only 
just over 5 per cent of gross 
domestic product in Singa- 
pore and Hong Kong, 10 per 
cent In South Korea and. 
Taiwan and little more than 
16 per cent In Japan. In 
Europe the figure is 25 per 
cent and often much more. 

But the factors which have 
produced low spending - 
chiefly enterprise welfare, 
where companies cover 
employees and often offer 
lifetime employment, and 
family welfare, where both 
income and caring is shared 
across the generations — are 


under mounting pressure, 
according to D idler Jacobs of 
the LSE’s Centre for Analy- 
sis of Sodal Exclusion. 

In addition, despite their 
younger age structure, the 
Asian economies all face 
ageing populations. The pic- 
ture varies by country, as 
does the precise structure of 
their welfare systems, but all 
are facing serious challenges 
made far worse by the Asian 
crisis. Mr. Jacobs says. “Age- 
ing populations are putting a 
stress on the family as an 
alternative to public welfare, 
but equally, enterprise wel- 
fare is being put under 
stress by globalisation, 
increased competition and 
the current financial crises 
which will raise the problem 
of unemployment.” 

Unemployment is already 
a major issue in South 
Korea, he says, even though 
most job losses have been in 
small and medium-sized 
enterprises, not big conglom- 
erates. Japan has only just 
begun to address its rapidly 


(< 


I*. 




f- 

F 

*= 

.7 


i 


ageing population, and after 
the longest recession since 
the second world war the 
tradition of a comp any job 
for life is under pressure. 

Korea and Taiwan have 
both passed welfare state 
legislation which in time 
will push up spending on 
pensions and other benefits. 
And while Singapore and 
Hong Kong face less acute 
difficulties, their heavy reli- 
ance on the private sector 
leaves them with a dramatic 
gap in income between the 
rich and poor. 

"The challenge to east 
Asian social welfare systems 
is that burden carried by 
families and enterprises may 
be too heavy.” Mr Jacobs 
says. Despite their success in 
recent years, “they are 
under a lot of pressure and 
are unlikely to be sus- 
tained.". 

Social Welfare Systems m 
East Asia: A comparative 
analysis. CASE. LSE. 
Houghton Street, London 
WCSA SAK 


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FINANCIAL times MONDAY SEPTEMBER 21 1998 


THE AMERICAS 


Clinton videotapes may jam internet 


By Loutes Kehoe 
fri San Francisco 


Millions of visitors to wet) 
sites broadcasting videotape 
Images of President Bill din- 
ton before the grand jury 
threaten to bring the global 
computer network to a halt 
today, delaying electronic 
mail and erecting a tempo- 
rary roadblock in the path of 
electronic commerce. 

The internet advanced its 
rote as a primary news 
medium last week, when 
millions of computer users 
logged cm to read the Starr 
report But the true test may 
come with today's release of 
the president’s videotaped 
testimony. 

If the tapes arouse the 
same level of interest as last 
week’s 445-page document, 


internet traffic may be be 
slowed by a factor of about 
200 per cent, predicts Mark 
Cuban, president of Broad- 
cast.com, a leader in the 
emerging field of internet 
broadcast services. 

BroadcasL.com will "host" 
the video showing of the 
Clinton videotapes for CNN 
Interactive, the website that 
was first to serve up the 
Starr report. Other news ser- 
vices planning to put the 
Videotapes on their websites 
include ABC. MSNBC and 
Fox News. 

Internet news services are 
determined to maintain their 
lead over traditional media. 
Last week. TV stations were 
forced to resort to showing 
images of computer screens 
as they struggled to keep 
pace with the instant mass 


publishing capabilities of 
computer networks. 

But television may reclaim 
its role today. Although 
video broadcasting via the 
internet is technically feasi- 
ble. the technology is still 
imperfect. Pictures are often 
jerky and the audio may be 
muffled. Far easier to turn 
on the TV. 

The size of today’s internet 
audience Is hard to predict, 
therefore. Timing may have 
a lot to do with it. The tapes 
are expected to be released 
at 9am Eastern Standard 
Time in Washington, which 
is 2pm in London. Many 
office workers are unlikely 
to have access to a television 
at that time, but they might 
want to catch a glimpse of 
the four hours of videotapes 
on their desktop PCs. 


CNN Interactive is expect- 
ing a second flood of visitors 
at the end of the business 
day as computer users take 
advantage of its “on 
demand” service which 
enables users to view the 
video at their own conve- 
nience. 

There are drawbacks to 
internet viewing. For a start, 
only people with up-to-date 
PCs will be able to view the 
videos online. Most PCs 
more than two years old will 
not be up to the task. 

Special software is also 
required. Two programs - 
Real Player from RealNet 
works (www.real.com) and 
Windows Media Player from 
Microsoft fwww.micro- 
soft.com/win dows/media- 
player) will do the job. 
Either can be downloaded 


free of charge, but It takes 
about half an hour to Install 
the software, depending on 
modem speed. 

The release of the historic 
videotapes presents a serious 
challenge to the internet 
infrastructure. The problem 
is that video files are huge 
when they are converted 
into the bits and bytes of the 
computer world. If large 
numbers of PC users attempt 
to view the approximately 
four hours of Clinton tapes, 
they could cause a huge data 
traffic jam. 

Unlike the Starr report 
available on dozens of news 
web sites, the videotapes will 
be accessible at only a few 
sites equipped to handle 
video broadcasting. Excess 
demand at these web sites 
could cause back-ps on 


regional networks, primarily 
on the east coast of the US. 
From there data traffic jams 
could spread. 

Like a highway system, 
the internet has critical 
junctions. If they get 
clogged, the effects may 
quickly be felt far afield, 
says Mr Cuban of Broad- 
casLcom. 

“It is as if you are trying 
to enter a tunnel blocked 
with traffic,'* he explains. 
“Before long, the back-ups 
get so long ail internet users 
are affected.” If internet ser- 
vices are seriously degraded 

by hundreds of thousands of 
people trying to view tbe 
Clinton videotapes, business 
users may begin to worry 
about growing dependence 
upon the public computer 
network. 


Middle 
class 
Moms 
turn off 


Clinton 

loses 

ground 


in polls 


By Louise Kehoe 
In San Francisco 


By Stephan Fitter 

in Washington 


Love him or loathe him, the 


tapes won’t change your mind 


\ 

A. • . 5* 

- ^/ v 'y - . w - . ? 




Clinton’s videotape testimony is unlikely to have a decisive effect 
on whether he is impeached or not, says Gerard Baker 




.v 


A t 9 o’clock this morning, 
just as America's pre- 
schoolers would nor- 
mally be sitting down to 
another episode of Arthur 
the Aardvark. the leading 
television networks will 
interrupt their broadcasts 
and begin relaying a heated 
four-hour exchange between 
several middle aged men 
about oral sex, genital stimu- 
lation and the meaning of 
the word “Is”. 

According to those who 
have seen the tape of Presi- 
dent Bill Clinton’s testimony 
before the criminal grand 
jury conducted on August 
17, it portrays a defensive 
president struggling to con- 
trol his temper as his inter- 
rogators press him with 
detailed questions about the 
nature of his relationship 
with Monica Lewinsky. But, 
in between the haggling over 
sex and semantics it also 
contains moments of 
humour, and. say the presi- 
dent’s defenders, portrays 
Mr Clinton at times in an 
almost sympathetic light. 

Indeed, by the time the 
nation has had the chance to 


digest the extraordinary and 
unprecedented spectacle, the 
irony, according to even Mr 
Clinton's critics, is that it 
will probably have very little 
substantive effect on the 
debate about whether or not 
the president should be 
impeached. 

“If you like the president, 
there are going to be times 
when you feel sympathy for 
him. If you think he's a guy 
you don't like, there's going 
to be things you’ll seize 
upon. But it’s not going to be 
a knockout blow," said Lind- 
sey Graham, a Republican 
member of the House judi- 
ciary committee. 

Mr Graham put his finger 
on what the White House 
hopes will prove to be a criti- 
cal factor in Mr Clinton's 
battle for survival. 

Much of the public seems 
to divide on the issue of Mr 
Clinton's future along 
heavily partisan lines. Demo- 
crats believe he has commit- 
ted a grave wrong, but do 
not see it as serious enough 
for impeachment; most 
Republicans want him out of 
office for what they see as 


“high crimes and misde- 
meanours''. So far, only a 
small minority of Democrats 
agree the president’s alleged 
crimes are impeachable. 

Republicans in Congress 
know they have to break 
down this division if they 
are to succeed with impeach- 
ment. But this problem of 
partisanship in the country 
is exacerbated by the way in 
which the Congress is tack- 
ling the issue. The House 
judiciary committee, which 
will initially decide whether 
the offences warrant a full 
impeachment hearing, is one 
of the most sharply divided 
in Congress. Last week's 
decision to release the video- 
tape, and more than 2,800 
pages of supporting docu- 
ments for the report of Ken- 
neth Starr, the independent 
prosecutor, was highly parti- 
san. Republicans voted to 
have almost all the material 
made public, while Demo- 
crats tried to block it. 

Senior Republicans are 
concerned, as today's bizarre 
events unfold, they will be 
blamed as partisan broad- 
casters of sleaze, and that, as 






CUntonr the American president's Bfe looks tanefler than ever 


it goes on. the judiciary com- 
mittee's partisan conduct 
could damage their case 
against the president A poll 
published yesterday for CBS 
News showed a sharp drop 
In support for the current 
Congress - a 12 percentage 
point fell in a week. Republi- 
cans know the impression of 
partisanship could kill off 
their impeachment inquiry. 
Democrats are aware by por- 
traying the process as 
one-sided they may give 
themselves the one thing 
they have lacked in the Lew- 
insky affair - a political 
position they can defend. 

The first stage of the 
impeachment process, there- 


fore. the judiciary commit- 
tee's proceedings, seem cer- 
tain to continue to be dogged 
by a curious tussle over the 
politics. Republicans are 
busy praising their Demo- 
cratic colleagues for being 
bipartisan (thereby proving 
their own impartiality). 

Tve really been heartened 
by both the majority and the 
minority counsel, the inves- 
tigators and the te ams on 
both sides working together, 
side by side, pouring 
through these materials,” 
said James Rogan. a Republi- 
can member of the commit- 
tee yesterday. 

Democrats are characteri- 
sing the proceedings rather 


differently - as a Republican 
terror. “The American 
people expect more from the 
members of Con- 
gress. . . Let's give every- 
body an opportunity for 
some fairness here. Right 
now what we’re doing is not 
good,” said Maxine Waters, a 
Democrat. 

President Clinton hopes 
that this curious spectacle - 
“unilateral bipartisanship", 
one member called it - will 
undermine the process itself 
But there is an inexorable 
quality to the proceedings, 
and for all their flawed polit- 
ical nature, it far from dear 
they can be derailed any 
time soon. 


T've got better things to do 
on a Monday morning than 
watch videos and read about 
Clinton's sex life.” said the 
soccer dad. 

The talk on the sidelines 
as the Icebreakers beat the 
Lemon Limers 1-0 this week- 
end would suggest only a 
moderate level of public 
interest In the Clinton-Lew- 
insky scandal. 

No one among the group 
of a dozen or so parents from 
San Mateo, an affluent city 
on the San Francisco penin- 
sula, planned to watch the 
Clinton videotape released 
today. 

Some were clearly irri- 
tated by the whole topic. 
“I'm environmental chair- 
man of my fishing club so I 
get a lot of e-mail." 

explained one father. “Now. 
I have to plough through all 
the Clinton jokes - pages of 
them - that people keep 
sending me." 

The moms were unani- 
mous in their revulsion at 
the release of “more 

detailed'' accounts of Presi- 
dent Clinton's affair with 
Monica Lewinsky. “We've 
had quite enough detail to 
know what happened. What 
more do we need to know?” 
asked one. 

The prospect of the teen- 
age girls (12- and 13-year- 

olds) on the field being 

exposed to yet more X-rated 
materials from Washington 
worried some. A drama 
teacher said she had been 
forced to rule the Clinton 
affair out of bounds in her 
sixth-grade “improv" class 
(ll-year-olds). “They know 
all about it. The boys were 
pretending to smoke 
cigars . . .” 

The consensus seemed to 
be that congressional Repub- 
licans were attempting to 
force the president to resign 
and that they might well be 
successful. Few people 
among this group would 
shed a tear over his depar- 
ture, it seemed. 


Opinion polls published over 
the weekend suggested a 
hardening of public attitudes 
towards President Bill Clin- 
ton in the week since the 
release of the report by Ken- 
neth Starr, the independent 
prosecutor, which described 
the president’s affair with 
Monica Lewinsky. 

The main source of com- 
fort for the White House 
amid the damaging revela- 
tions In the Starr report has 
been Mr Clinton's continued 
high approval rating. Yet a 
poll by Newsweek magazine, 
conducted on Thursday and 
Friday, found 46 per cent of 
people thought he should 
consider resigning, up from 
39 per cent a week earlier. 
Some 41 per cent believed 
impeachment hearings were 
warranted, down from 35 per 
cent a week earlier. 

Mr Clinton's job approval 
rating weakened from 61 per 
cent to 58 per cent, while 66 
per cent of those polled 
believed the president lied 
under oath. The poll of 750 
adults had a margin of error 
of plus or minus 4 percent- 
age points. 

A majority of those polled 
disapproved of the release of 
Mr Clinton's videotaped tes- 
timony, due to be made pub- 
lic today. Fifty two per cent 
disapproved, while 44 per 
cent approved 

A poll by CBS News 
released yesterday suggested 
a hardening of attitudes. 
According to this poll, with a 
similar 4 per cent margin of 
error. 56 per cent believed 
Mr Clinton should be cen- 
sured by Congress, while 37 
per cent favoured resigna- 
tion. a slight increase from 
the previous week's results. 

In another poll, for Fox 
News, just 38 per cent of 
those surveyed approved of 
the way Congress was han- 
dling the matter. Fifty per 
cent disapproved of the way 
Republicans were handling 
the issue, compared with 45 
per cent who disapproved of 
the Democrats. 


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FINANCIAL TIMES ' MONDAY SEPTEMBER 25 




INTERNATIONAL 


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53RD UNITED NATIONS GENERAL ASSEMBLY KOFI ANNAN SEEKS TO PAVE WAY FOR TACKLING A HOST OF UNRESOLVED WORLD ISSUES 


UN chief seeks role for millennium 


news ^igest:.- . 1 

OPENINGS FOR FOREIGN SUPPLIERS 1 \ 


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By Laura Sifter at the United 
Nations bi New York 


Kofi Annan, 

secretary- general of the 
United Nations, today seeks 
to capture the imagination 
of world leaders assembled 
for the opening of the 53rd 
general assembly. 

His message of global poli- 
tics for the new millennium 
is part of the fresh role Mr 
Annan believes the United 
Nations must forge for itself. 
“He will try to spell out a 
vision that takes into 
account tbe changes of glo- 
balisation. which have been 
on the whole positive, but 
these benefits are not felt 
equally. Millions are living 
on the margins," said Shashi 
Tharoor. a close aide. It was 
now time to "get the world 
leaders to see that there is a 
lot we can do collectively," 
be said. 

Opening his second gen- 
eral assembly. Mr Annan 
has completed some of the 
reforms he - proposed last 
year. But with problems - 
including the reform of fin- 
ancing and the Security 
Council - unresolved, the 
UN is not yet the modem, 
solvent institution he would 
like it to be. The 185-member 
institution born at the end of 


the second world war is still 
shedding its old skin and 
adapting to the changed 
post-cold war world. 

With terrorism, growing 
economic instability and 
poverty, and conflicts round 
the globe set to dominate the 
opening of the assembly, Mr 
Annan is seeking to map out 
an agenda for the new mil- 
lennium. 

The circumstances, how- 
ever. are not ideal. Washing- 
ton bas no senior envoy in 
what Is regarded as the most 
powerful US diplomatic post 
after s ec re tary-of- state. The 
nomination by President BxU 
Clinton of Richard Hol- 
brooke. the architect of the 
Dayton peace accords in Bos- 
nia. as US ambassador to the 
UN is being investigated, 
which could leave the seat 
empty until next year. 

The US has yet to pay 
some $1.6bn in outstanding 
dues and could lose Us vote 
in the general assembly 
unless Congress approves 
payment. 

Mr Annan's agreement 
with Iraq has unravelled. 
Last February he averted US 
military intervention by stri- 
king an accord with Iraq's 
President Saddam Hussein 
to allow UN weapons inspec- 
tions. Baghdad has again 
suspended co-operation but 
the US this time is unwilling 
to threaten tbe use of force 
and is pressing Mr Annan to 
take the lead in seeking a 
solution. 



Kofi Annan: not helped by an equivocal US 


He appears reluctant to 
take on what appears a no- 
win situation. He recently 
joked in private that “SG" 
did not stand for secretary- 
general. but scapegoat. 

Despite efforts by Mr 
Annan to address the plight 
of Africa, tbe situation there 
has deteriorated - including 
war in the Congo, a stale- 
mate in Western Sahara, fail- 


ure in Angola to implement 
fujly a four-year-old peace 
accord and the possible 
resurgence of war. and an 
unresolved border dispnte 
between Ethiopia and Eri- 
trea. 

Foreign ministers on 
Thursday will hold a Council 
session on Africa but, with 
memories or UN failures in 
Somalia and Bosnia still 


fresh, the Security Council 
has been loathe to approve 
full-scale peacekeeping mis- 
sions. relying on regional 
organisations to do the job 
instead. 

“There is a growing recog- 
nition that the UN is far 
removed from the centre - a 
realisation that regional 
organisations or powers can 
better resolve crises," said a 


western diplomat. 

Mr Annan is concerned 

about the continuing vio- 
lence by Serbia in Kosovo. 
The Council has done little 
more than demand an end to 
the conflict and impose an 
arms embargo, which is 
widely violated. 

The Council bas repeat- 
edly addressed the conflict 
In Afghanistan but has made 
no progress. 

Madeleine Albright. US 
secretary of state, will hold 
talks with her Russian coun- 
terpart and officials from the 
six states bordering Afghan- 
istan. It will also mark the 
first meeting between senior 
US and Iranian officials 
since shortly after the revo- 
lution nearly a decade ago. 
The Taliban controls most of 
Afghanistan but they do not 
hold the assembly seat 

With most world leaders in 
New York, tbe general 
assembly has always pres- 
ented an ideal opportunity 
for bilateral meetings 
although Ms Albright and 
her Iranian counterpart, 
Kamal Kharazi, do not plan 
to speak directly. , 

India and Pakistan will 
hold face-to-face talks, which 
diplomats hope could ease 
tensions in the wake of their 
recent nuclear tests. It is 
also the first rtmp an Iranian 
president has visited the UN 
in a decade and it could be 
the last general assembly for 
Nelson Mandela, the South 
African president. 


China draws up blueprint | 
for hydro-electric power 


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China plans to construct five large rtydro-eiecfric power 
stations posting a total of S7^3b^.^^tQ v ^reating signif- 
icant demand for mtertrationaJ fire^6^arkl\equipment 
from foreign suppitefs. Thoptan, r^Dprtqd byifw official 
media, comes as China has oven^j«G%^Tpatny prov- 
inces. industry executives saJd^nje Wu^^-howeiref 1 . 
envisages disproportionate, gr^^i^nfi^o^ower genera- 
tion over the next 12 yaare : %11wtcoikT^ reliance 

on coal-fired stations. . -• - : - 1 ':*£■ ; -• : ' 

China currently exploils«rt^'15.^' : <tentof an estimated 
378m kW of hydropower Poteftf ^£pwipsrad with 50-90 
per cent in some develq^-bsuntties.' Coal-fired stations 
generate about 70 pw thb;tidtl6n > s electricity. The 

State Power Corp was=to undertake thfijptbfects. accord- 
ing to the blueprint, l^.ifti^fOTegn'financlng and invest- 
ment would be needectjafhes Kynge, Beijing 


fiie" *- 

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COLOMBIAN CENTRAL RANK 


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Pressure eased on companies 


Colombia has cut the amdurt 7 of-m<Sri^corhpanies must 
deposit with the central bank on loads obtained from 
abroad, as part of efforts to take -pressure off the interest 
and exchange rates. The move,: last 'Friday, follows a deci- 
sion by Chile to cut the rate on a similar reserve require- 
ment to zero. Both announcements follow sharp rises in 
the risk premiums Latin American governments and com- 
panies must pay for borrowing on the international capital 
market The reduction of the reserve requirements should 
help offset some of this increased borrowing cost. 

The Colombian central bank cut the proportion of exter- 
nal credit that must be lodged with ft from 25 to 10 per 
cent It also cut the length of time that the money must be 
deposited from 12 to six months. The requirement - intro- 
duced in 1993 - was reduced from 30 per cent in January. 
Richard Lapper, Latin America Editor 


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World hopes India will act on nuclear fears 


Sumitomo settles class actions 


Wrnr* 


By Mark Nicholson and 
Alexander Nfcoll In New Delhi 


The US, shocked by India's 
nuclear tests four months 
ago. will be searching for 
signs of a more conciliatory 
tone this week when Atal 
Behari Vajpayee, Indian 
prime minister, addresses 
the United Nations general 
assembly. 

The west is hoping that 
his speech on September 24. 
as well as a round of talks 
expected in Washington 
tomorrow between US and 
Indian officials, will clarify 


India's policy on nuclear 
weapons. The Indian tests, 
quickly matched by Pakis- 
tan, tbrust South Asian 
security and the future of 
the world's non-proliferation 
regime towards the top of 
Washington's foreign policy 
agenda. 

The west is alarmed at the 
prospect of a nuclear stand- 
off between two countries 
which are already engaged 
in low-level conflict over the 
disputed Himalayan terri- 
tory of Jammu and Kashmir. 

After a separate bilateral 
meeting in New York on 


September 23 between Mr 
Vajpayee and Nawaz Sharif, 
the Pakistani premier. India 
and Pakistan will announce 
the “modalities" of a 
resumed series of official- 
level talks on a range of sub- 
jects including Kashmir as 
well as the security situation 
and confidence-building 
measures. 

Renewed Indo-Pakistani 
talks would help to allay 
western anxieties, though 
the prospects of any break- 
through remain as limited as 
in many previous rounds. 

Of equal concern to the 


west will be indications of 
Indian willingness to sign 
the nuclear Comprehensive 
Test Ban Treaty fCTBT), 
part of the architecture of 
non-proliferation thrown 
into jeopardy by the tests. 

Strobe Talbott, US deputy 
secretary of state, will 
tomorrow hold a fifth formal 
round of discussions with 
Jaswant Singh, Mr Vajpay- 
ee's personal envoy. Though 
their talks cover the condi- 
tions under which India 
might sign the CTBT, the 
content has been closely 
guarded, with no formal 


record being kept 

Indian officials believe 
New Delhi will eventually 
accede to the CTBT and say 
they are not seeking any 
“textual" change to the 
treaty, though analysts in 
the Indian capital suggest a 
commitment to sign is 
unlikely to be given, for 
domestic political reasons, 
before three important state 
elections in November. 

New Delhi is looking for a 
relaxation of a ban imposed 
by the US and other nuclear 
powers on exports of nuclear 
technology, arguing such a 


concession would reflect 
India's de facto status as a 
nuclear-armed country and 
is necessary to win political 
backing at home for entry 
into the CTBT. 

While Mr Vajpayee, in his 
UN speech, is likely to 
emphasise what India sees 
as its nuclear status, he will 
also re-state India's 
long-standing call for con- 
certed steps towards global 
disarmament. New Delhi 
sees no contradiction 
between these two positions, . 
stressing its need to ensure j 
its own national security. I 


Sumitomo Corp, the Japanese trading company, has 
agreed to pay S42.5m to settle two US class actions 
related to its alleged manipulation of the copper market 
between 1993 and 1996. In September 1996, the company 
revealed losses of about $Z6bn or Y265bn due to unau- 
thorised copper trading by Yasuo Hamanaka. The settle- 
ment which must be accepted by the California Superior 
Court would conclude all outstanding class actions 
against the company, said Sumitomo, it vigorously denied 
the plaintiff’s allegations under the antitrust statutes of 19 
US states and denied liability or any wrongdoing. 

During the first half of the financial year the company will 
take a $35.5m charge, equivalent to Y5bn. to cover the 
settlement To make the full $42.5m payment, the group 
expects to use $7m from a fund set up in May as part of 
its settlement with the US Commodity Futures Trading 
Commission. In August Sumitomo paid $99m to reach a 
proposed settlement with members of a class action in 
New York. Mr Hamanaka was sentenced to eight years in 
prison for forgery and fraud by a Tokyo District Court in 
March. Paul Abrahams, Tokyo 




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FINANCIAL TIMES MONDAY SEPTEMBER 21 1998 


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LONDON OFFICE SPACE 


Call to raise 
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Property Cor mp onnent 


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The Corporation of 
1 b expected to ask the Gov- 
ernment Office for London - 
the body planning the new 
office of directly elected 
mayor - to allow now build- 
ings in the City of London to 
be twice as -big as the pro- 
posed tight limits. 

The corporation - the 
municipal authority for the 
City of London - wants a 
permitted height of 100m 
<109 yards) or bulk of 400,000 
sq ft. 

Had the proposed restric- 
tions been la effect last year, 
it would have delayed or 
halted rcughly a quarter of 

all development in the City, 
Baid Stunt Fraser, ehair man 
Of the Corporation's planning 
and transport committee. 

The corporation will be 
boldlnf a consultation exer- 
cise vith property owners, 
developers, occupiers and 
inve&ars about its response 
to tba government's propos- 
als m the powers of the new 
major and Greater London 
Autaority. 

h a policy document 
tested last summer, the Gov- 
ernment Office for London 
pioposed that planning 
plications on buildings of 
strategic significance" be 
called in for review. 

It defined those buildings 
£ i anything above 200,000 sq 
f in bulk or 50m in height - 
i xmt a third of the height of 
tie International Financial 
( entre, formerly the 
mtWest Tower, the 
scond-taHest building In the 
UC 

Height and bulk is a criti- 


Ballot 


Leader of 


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row puts opposition 
pressure warned 
4 on Blair oyer party 
leadership euro poll 


By George Parker, 
Polttfca! Correspondent 


By George Parker 



The leadership of the 
governing Labour party yes- 
terday faced fresh claims 
that it is bending party rules 
to stop leftwing candidates 
winning places on the 
national executive commit- 
tee, Is ruling body. 

It emerged yesterday that 
ballot papers were sent to up 
to 100,000 lapsed members, 
many of wham are thought 
to be hewer members tend- 
irg to favour Tony Blair, the 
p-tae minister. 

Marts Seddon, one of six 
fcftwlng candidates challeng- 
tsg for a place on the NEC, 
iflid the move breached 
party roles and should be 
investigated. 

The row Is an embarrass- 
, meat for Mr Blair, who has 
been accused by leftwing 
critics of having an authori- 
tarian desire to stamp out 
criticism of his leadership at 
all levels of the party. 

Many senior party figures 
have, been wheeled out to 
criticise the candidates on 
the leftwing slate, most 
recently Neil Kinnock, the 
former Labour leader and 
EU transport commissioner. 

labour headquarters yes- 
terday denied that aa many 
as 100,000 ballot papers were 
wrongly distributed. But it 
could not confirm a figure. 

The party blamed a "badly 
drafted constitution”, put 
together when the rules 
were changed last year, for 
confusion about who was eli- 
gible to vote. 

Tom Sawyer, general sec- 
retary of the Labour party, 
said there was “sane confu- 
sion" over the membership 
rules. 

He insisted Out when the 
matter was drawn to his 
attention he took legal 
advice which "supported my 
dodstan to err on the side of 
caution in allowing the rele- 
vant individuals to vote". 

Some observers In London 
claimed the lapsed members , 
aad partly been included in 
the ballot to disguise falling 
membership numbers- ; 

The results of the NEC 
ballot will be announced at 
next week's Labour confer 
ence in Blackpool, in 
north-west England, and win 
be an indication of how 
deep-rooted the Blair revolu- 
tion Is in the Labour party. 


William Hague, the leader of 
the opposition Conservative 
party, will today launch his 
party's internal ballot on the 
European single currency, 
amid renewed warnings 
from senior party figures 
that the exercise would 
be futile and divi- 
sive. 

Mr Hague win be bolstered 
by an opinion poll which 
suggested he will easily win 
the poll of about a third of a 
million registered party 
members. 

But Michael Heseltine, the 
former deputy Conservative 
prime minister, renewed his 
attack on the ballot - which 
will cost £300,000 ($485,000) - 
claiming it was “frretevant" 
and would only confirm 
what was already known 
about the views of activ- 
ists. 

Mr Heseltine and Kenneth 
Clarke, the former chancel- 
lor of the exchequer, are 
expected to become increas- 
ingly vociferous in their 
opposition to Mr Hague in 
the run-up to next month's 
party conference. 

Mr Heseltine argued that 
the party needed to win back 
former Conservative voters 
who switched to pro-Euro- 
pean Labour and Liberal 
Democrat candidates at the 
last election. 

“We've tried all this in 
government - every time we 
were a bit tougher on 
Europe our support went 
down," be said- ■ 

But Mr Hague will data 

he was vindicated If his view 
that Britain should stfey cut- 
side the euro during the life- 
time of the next parliament 
is overwhelmingly endorsed. 

A poll in- the Sunday 
Times newspaper of 117 local 
party chairmen found 88 per 
cant would support the lead- 
ership. Only 10 per cent said 
| they would vote against 

Meanwhile. Michael Por- 
tillo, former chief defence 
minister and ardent Euro- 
sceptic, has indicated he 
hopes to make ah’ early 
return to parliament in a 
winnable by-election, 

Mr Portillo has been stead- 
fastly loyal to Mr Hague 
since he lost his seat at the 
last ejection, but many Con- 
servatives would like to see 
him installed as party 
leader. 


BRITAIN 


Harsh words on manufacturing performance fail to stand up 


Treasury claims of 
low productivity are 
contradicted by 
government data, 
writes Peter Marsh 


Making progress 


cal issue in the City, where 
fi na n cial services firms, the 
majority of tenants, increas- 
ingly want large areas to 
accommodate vast trading 
floors and buildings large 
enough to accommodate 
thousands of employees. 

Last year, Merrill Lynch, 
the US-based investment 
bank, received planning per- 
mission to redevelop a 

600.000 sq ft site In the City 
for its new headquarters. 
Several other developments 
of more than 200,000 sq ft of 
space have received plan- 
ning permission within the 
past year. 

"Financial companies 
which really need buildings 
need them yesterday,” Mr 
FTaser said. Hie requirement 
to put each large building 
through a long consultation 
was likely to deter many 
occupiers, he said. “Ten 
years ago, even five years 
ago, 600,000 sq ft of space 
wasn't known about. 
Frankly, it's Important for 
us to keep the Merrill 
Lynches of this world in the 
City." 

There are no formal height 
and hulk restrictions on City 
buildings, although there are 
restrictions on those that 
obscure certain views of St 
Paul's cathedral, and rules 
on the preservation of his- 
toric architecture. 

Mr Fraser also Bald the 
corporation was questioning 
the riwffnitinn of a building 
of strategic importance. A 

100.000 sq ft building could 
have strategic importance in 
some areas of London, but 
less so in the City, where 
such b uilding s are increas- 
ingly mmmnnpIsRB 


R ecent criticism by the 
Treasury of low produc- 
tivity in UK manufac- 
turing Is belied by the gov- 
ernment's own data 
indicating a big tururound 
in export performance by 
much of the sector in the 
past 10 years. 

Figures obtained for the 
Financial Times by the 
Office for National Statistics 
reveal that Britain’s com- 
bined mechanical and elec- 
trical engineering industries 
- about a quarter of which 
are foreign -owned - had a 
trade surplus last year of 
£3.7bn ($6.1bn) compared 
with a deficit of EO.Bbn in 
1868. 

The improved perfor- 
mance, due mainly to an 
increase in exports, is part of 
a big improvement in the 
trade balance in the capital 
goods sector, covering a 
range of Industrial equip- 
ment. It is the most signifi- 
cant tururound in trade per- 
formance of any single 
sector of the UK economy In 
the past decade. 

Between 1988 and last 
year, capital goods exports 


performance 

1988 

1997 

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increased from £l3.0lbn to 
OUStm. The increase of 145 
per cent la comfortably 
above the 118 per cent 
growth in the whole of UK 
merchandise exports over 
this period. 

David Kemohan, research 
and policy adviser at the 
Engineering Employers' Fed- 
eration, the main UK engi- 
neering trade organisation, 


said the data underlined the 
improved competitiveness of 
an important part of UK 
manufacturing. The figures 
indicated that some aspects 
of the Treasury’s criticisms 
of industry for low labour 
productivity had been “over 
done”. 

He added: “It is unedifying 
to see Gordon Brown [the 
chancellor] bashing manu- 


facturing industry at a time 
when it is under extreme 
pressure due to the high 
pound.” Many of the federa- 
tion's member companies 
have been complaining or 
difficult trading conditions 
due to the level of sterling 
and gathering world eco- 
nomic gloom. 

In recent months. Mr 
Brown and other govern- 


ment colleagues have been 
holding seminars to alert 
industry to ways of improv- 
ing productivity to the levels 
of international rivals. 
Studies by the McKinsey 
consultancy company have 
shown that UK labour pro- 
ductivity is significantly 
below that in other devel- 
oped countries in a range of 
industries. 

But Mr Kemohan said the 
improved trade performance 
showed that labour produc- 
tivity figures gave only part 
of the picture, with compa- 
nies' ability to maximise out- 
put from a fixed amount of 
capital investment also 
being important 

John Walker, chairman of 
Oxford Economic Forecast- 
ing, a consultancy, sold the 
trade data indicated 
“improved competitiveness" 
by a big part of industry. 
“The trade figures [in the 
past decade] have held up 
better than many of us 
thought though there is a 
danger of the improvement 
being messed up by the 
appreciation in sterling.” 

Since 1988, Britain's capi- 
tal goods industry, which 
encompasses a large swathe 
of manufacturing from taps 
to tractors, has been among 
the largely unsung success 
stories on the export front 
Capital goods exports (which 
do not include cars) have 


Increased nearly 2V, times to 
E31.Sbn last year, comfort- 
ably above the rate for the 
increase In Britain's total 
merchandise exports. 

The industry’s perfor- 
mance is one of the main 
reasons why Britain’s total 
deficit on manufactured 
goods shrunk from £l&3bn 
in 1988 to £&8bn last year. 

Prospects for the next few 
years look less rosy. As the 
high pound has cut into 
manufacturers' export mar- 
gins. many engineering com- 
panies are struggling to keop 
up overseas soles. The result 
is likely to be a narrowing of 
the capital goods surplus 
this year and next 

Unpublished findings from 
the National Institute of Eco- 
nomic and Social Research, 
an economics think-tank. 
Indicate that roughly one- 
eighth of the Improved 
export performance of the 
whole of manufacturing 
since 1988 has been due to 
toward Investment. 

This percentage is likely to 
have been significantly 
higher for the UK capital 
goods sector, as opposed 
to manufacturing generally, 
on the grounds the 
sector has scon a large vol- 
ume of inward Investment 
from US, Japanese and Ger- 
man companies. 


Engineering state-up, Page 20 


You arrive at a crossroads only to discover 
that the signpost has been blown 
down in a storm. You have no map. 

Which direction do you take? 




WMV1- 






PARIBAS 


fig- 1 

You have no map. 
Remember : 


No.l IN 
THE EURO 


Best Euro capital 
markets bank 



First Supranational 
in Euro 


fig. 2 

You tost your compass. 




fig- 3 

What good’s a cellular 
phone if you don’t know 
where you are? 




first Sovereign 
in Euro 


First Convertible 
in Euro 




No.l 

Euro Swap House 








LEADING THE WORLD IN THE EURO 

Today, it is easy to feel lost when confronted by the future. The financial landscape is shifting 
before our very eyes. Moving into new territory, as we are with the Euro, is fraught with uncertainly. 
What you need is a guide who’s been this way before. 

Founded 125 years ago simidtaneously in 4 European countries, Paribas was the first bank with a 
truly European philosophy. Today, with an organisation based on banking activities and industrial sectors, 
no other bank can equal its experience in crossing financial frontiers. 

In the 1??8 Euromoney awards for excellence, Paribas was voted M best Euro capital markets 
bank? As we get closer to the “big bang” of 1???, the experience of Paribas as the lead Ecu bookrunner 
since 1?81 puts the bank in a unique position of authority in all questions relating to the Euro. And 
it is, in fact, only by the application of experience that we can solve the problem of the crossroads 
with the fallen signpost 

How do you decide which way to go? You leverage your own recent experience. Since you do 
know where you’ve come from, you simply raise the signpost, point the relevant arrow in the direction 
from which you have come - and the way ahead is clear, http://www.paribas.com 


PARIBAS Thinking beyond banking 




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FTNANCIAX TIMES M ONDA Y3EPf£ M BER 21 1 998 


BUSINESS 

WANTED? 


You want to 

advertise in the 

Financial Times. 


For further 
information 
please contact 

Melanie Miles 

+440171873 3349 
Marlon 
Wedderbum 
+440171873 4874 


THE WEEK AHEAD 


DIVIDEND & INTEREST PAYMENTS 



■ TODAY 

Abbey National Treasury 
Cno-Tec 10 Lkd Gtd Nts 2006 
FFr135.0 

Ab trust Scotland Inv 1.3p 
Alcan Aluminium $0.15 
AngJovaal B0. 17 
BPI Cap Rn Ser B Step-up 
FRN Gtd N/Vtg Pf 
$0.45 

Beacon InvTst 1.7p 
Birmingham Mldshires Bldg 
Scty FRN 2000 £202.81 
British Telecom 11.45p 
Commonwealth Bank of 
Australia 13%% Bd 1999 
AS 137.50 
Heiton IR2.3p 
M & G Equity Inv Tst 0.99p 
Do Package Units 0.99p 
Nash (Wm) 2.7p 
SGW Rn 13%% Gtd Nts 2001 
A$331 250.0 

Sotheby's Class A Lim/Vtg 
$0.10 

Westpac Sec Admin Class A 
Mtg Bckd FRN 2028 $1298.34 
Do Class B $1552.96 
Wren 1.75p 

■ TOMORROW 
Enron $0.2375 
Eve 4.7p 

Nihon Doro Kodan 7%% Gtd 
Bd 2004 $381.25 
Oriental Restaurant 2.4p 
Peoples Rep of China 4%% 
Nts 1998 Y43750.0 
Royal Dutch Petroleum 
FL1.3B 


Southern Vectis 2.3p 
Yokohama 7&% Gtd Bd 2004 
$76.25 

■ WEDNESDAY 
SEPTEMBER 23 

Eksportfinans Sb FRN 2002 
$28.45 

European Inv Bank 11% Ln 
2002 £275.0 

First National Bldg Scty Fltg 
Rate Perm Int Brg £50.98 
Standard Chartered Bank Sb 
FRN 2006 $1555.69 
Yeoman Inv Tst 6.25p 

■ THURSDAY 
SEPTEMBER 24 

Asian Dev Bank 10%% Ln 
2009 £256.25 

Birmingham Mldshires Bldg 

Scty Sb FRN 2005 £41400.0 

Boots 10%% Bd 2017 

£2531.25 

B racist ock 1.4p 

British Land 8%% 1st Mtg db 

2035 4.4375p 

Reid 7p 

Greenafls 11Vis% Db 2014 
£5.75 

Do 7% Cv Sb Bd 2003 3.5p 
Guaranteed O'seas Loan Rn 
(No 1) FRN 2007 £3887.95 
Int Sank for Reconstruction & 
Development 9Vh% Ln 201 0 
£4.75 

Kansai Int Airport 7%% Gtd 
Bd 2007 £73.75 
Midland Bank Und Prim FRN 
(Sep 1935) $306.67 


Robert Wiseman Dairies 2.71 p 
Sid law m% un Ln 2003/08 
£3.75 

Spain 11%% Ln 2010 £293.75 
Standard Chartered Und Prim 
Cap FRN £100.82 
Treasury 2%% IL 2001 £2.547 
Woolwich FRN 1999 £200.07 

■ FRIDAY 
SEPTEMBER 25 
ABF Invs m% Un Ln 1987/ 
20021.875p 

Australian Opportunities Inv 

Tst i.Bp 

BLP 2.75p 

Bailey (Ben) 0.9p 

Bickerton 0.5p 

British Land 8%% Bd 2023 

£443.75 

Do 12%% Bd 2016 £625.0 
Cranswlck 8_25p 
Daiwa Und Gtd FRN 
Y1 361 096.0 

Renting Worldwide Inc Inv Tst 
IP 

Do Units Ip 
Grafton IR1 0.5p 
HIH Cap m% Cv Cap Bd 
2006 £187.50 

Henderson Electric & Gen Inv 
Tst 2.1 5p 
Hercules $0.27 
Jupiter Geared Cap & Inc Tst 
1999 1.4p 

Konica 714% Nts 1998 
Y725QQQ-Q 

Kvaemer 10%% Bd 2006 
£106.25 

Mansfield Brewery 11%% Db 


2010 £5.75 
Mars ton Thompson & 
Evarshed 10%% 0b 2012 
£5.125 

M & G Recovery Inv Tst Ip 
Do Geared Units Ip 
Do Package Units Ip 
NationsBank $0.38 
New London Cap 6p 
New Zealand 1 VA% 2014 
£287.50 

Northern Electric 12.661% Bd 

1999 £633.05 

North Mlcfland Construction 
1.5P 

Porvair2.3p 
TNT Post FLO .30 
Treasury 8% 2009 £4.0 

■ SATURDAY 
SEPTEMBER 26 

British Land 6% Sb Irrd Cv 
Bd £30.0 

Exchequer 12%% 1999 
£6.125 

North British Housing 8%% 
Gtd Sec 2016/20 £4.3125 
Treasury 13%% 2004/08 
£6.75 

Vaux 9%% Db 2015 £4.9375 
Do 10%% Db 2019 £5.375 
Do 11%% Db 2010 £5.875 

■ SUNDAY 
SEPTEMBER 27 
Mersey Docks & Harbour 
6%% Rd Db 1996/99 £3.375 
Treasury 8% 2013 £4.0 


UK COMPANIES 


■ TODAY 

COMPANY MEETING: 

Drew Scientific, 90, Fetter 
Lane, EC.. 11.30 
BOARD MEETINGS: 

Finals: 

Avocet Mining 

Cairngorm Demutualisation 

Pizza Express 

Rage Software 

Interims: 

Arcon fait Res 
Bemrose 
Caldwell Invs 
Eurotunnel 
IS Solutions 
Jacks (Wm) 

Maybom 

Moorfield Estates 
Policy Master 
Roxboro 
Taylor Nelson 
Transtec 
Vanguard Medica 
Wellington 

■ TOMORROW 
COMPANY MEETINGS: 

Park Food, Tranmere 
Rovers FC, Prenton Park, 
Prenton Road West, 
Birkenhead, 12.00 
Wilshaw, Richmond Hill 
Hotel, Richmond. Surrey. 
11.00 

BOARD MEETINGS: 

Finals: 

Benchmark 


Gyrus. ? 

ICM Computer 
Powerscreen Int 
interims: 

Aquarius 
Breeden 
CrestaCare 
French Connection 
Metal rax 

Oxford Gly cosciences 
Sytner 

Tarmac 

Tesco 

Tudor 

Utd Industries 

■WEDNESDAY 
SEPTEMBER 23 
COMPANY MEEtlNG: 
British Biotec, Insurance - 
Han, 20, Aldermanbury, E.C. 
114)0 

BOARD MEETINGS: 

Rnals: 

Barratt Devs 

Kter 

McBride 

Northamber 

Schroder Ventures 

Interims: 

Avis Europe 
Biocompatibles Int 
Bowthorpe 
Brake Bros 
Dawson Int 
Densitron 
LiileshaU 
Quality Software 


Ryan Hotels 
SOentrilght- 
Sibi life & Provincial 

■ THURSDAY 
SEPTEMBER 24 
COMPANY MEETING: 
Tinsley (Eliza), Botanical 
Gardens, Edgbaston, 
Birmingham, 10.30 
BOARD' MEETINGS: 
Finals: 


;YfekM> . 

Vlnfierlms: 

Ghirosctence 

HatPin 

Hewden-Stuart 

Norcor 

■ FRIDAY SEPTEMBER 25 
BOARD MEETING: 

Interim: 

Cox insurance 

Company meetings are 
annua/ genera/ meetings 
unless otherwise stated. 
Reports and amounts are 
not normally avfjlable until 
approximately ax weeks - 
after the board meeting to 
approve the prelminary 
results.This list i4 not 
comprehensive 
companies are nit obliged 
to noti/y the Stock Exchange 
of imminent announcements. 




CONFERENCES, VENUES AND COURSES 


CONFERENCES 


Queens College Cambridge 
ENTERPRISE BRITAIN 
This conference is aimed at 
practitioners in the financial and 
business communities, policy 
makers and support agencies 
concerned with smalt and medium 
sized enterprises (SMEs). 

Based an the latest Cambndge 
CBR Survey of 2500 UK SMEs it 
provides an authoritative insight 
into the financing, training, and 
innovative activities of this critical 
sector. 

Tel: 44 (0)1223 335250 
Fax: 44 (0)1223 335768 


* 


^ESRC CENTRE FOR 
BUSINESS RESEARCH 


October 7 


Understanding and 
Implementing Global 
Investment Performance 
Standards 

The Global Investment 
Performance Standards (GIPS «) 
have begun to change the way 
investment performance is 
reported around the globe. This 
conference will introduce the 
GIPS and Improve managers' 
awareness of how the GIPS meet 
the needs of thee clients with 
respect to reported Investment 
performance. 

Contact: At MR in the USA: 

Tel: 1(804) 980-3668, 6XL 123 
Fax: 1 (804) 980-3634, 

Internet: http:7Anninw.aiinr.org 


&&IMR 


London 


Conferences, 

Venues 

& 

Courses 


OCTOBER 7 & 22 
Selling Your Business? 

Achieve the heJ dual und miuunive ihc 
value of Liu- butincm pnor ro sjlc The. 
half iii> ciinfL'itniv ensure' you a\Md 
the nUis and pitfalls, and identifies key 
steps la maxim King your personal 
mum from ihe sale* 

Coiucc Nicky Cotter 
Td- til^lt 4281 14 

LONDON 

OCTOBER 12 

Fourth South Africa Forum 

OCTOBER 13 

Second Southern Africa Forum 

Two individual round tables with 
ministers. officiaL* and business leaders. 
12 Os-lober features nsk asses. mem. 
policy analysis and prospects for 
Corporate sector. I.’ October stresses 
policy abjccnscs. i in pie menial ion. 
insesinHiDi am) trade Sponsors: Dc 
Beers. Fleming Martin. Shell SA Ply. 
Associates S:\BA.AfncaAiul\sis 
CiiMjci: Rerun .Southern Africa 
Tel- 01225 460744 Fat: 0121-5 44290? 
E-nuuI. )O67ni.2270V« coaptncrve com 

LONDON 

OCTOBER 14 & 15 
FT World Mobile 
Communications Conference 

This annual FT conference has once 
again attracted an uuenuimtul audience 
nl senior executives from the mobile 
industry. Speakers include: Mr Haas 
Snook. Orange pic, Dr Jung-Uek Sco. 
SK Telecom. 

Contact: Sian Funcowt 
Tel: 0171 87? 5262 
Email: sion.farv.-oiinS’fl Ci*m 
uAvss.ricunfcrvnces.cwn 

LONDON 

OCTOBER 14~16 
JANUARY 26 - 28 
Advanced Financial 
Modelling with Excel 

Aimed at those ufiosc work involves the 
me of Excel to devdip hnamd models 
particularly those in M&A. acquisition 
financing an) project finance Modelling 
icthnKpH's include ■ Anas arithmetic 

* Linear Regression • Optimisation 
■ Monte Carlo Simulation • Financial 
FrjiDru.cffc for NtJctlmj! ■ ffcscfopfBeat 
uf u fully integrated acquisition model 

• Assumes a bias |jhw kdp: *if Excel 
CiHHavt ZxcaFSMDfoiiIcuuJs 
TvL-WiOnti25 53TOUSU 

l ax. 4 <(1)1025 52.W.57 
L-Mail' uaitunp<?(und co uL 

LONDON & DUBLIN 


OCTOBER 19-20 
17th International Retail 
Banking Conference 

Merger*. A equations A Alliances 
in Consumer Financial Services: 
End-game ar Sew Gone? 

Exploration of the rocwt agmffcan trends 
in (be retail financial services industry: 
cotboiidauin. and gtobaksaiicitL Keynote 
speech (reoi Sir Brian Pitman. Chairman 
Lloyd, T5B. Presentations from BCR 
Canplo. W'mrmbur, MenoNocdbanlccn 
and mote _ 

Laffeny Conferences. 

Tel: +353 1 671 8022 
Fie: +353 1 671 3594 
E-mail: kodomielll^laH’crtyJe 
LONDON 

OCTOBER 20 & 21 
The 2nd Utility Congress 
• The Competition Audit 
A two day conference and exhibition 
organised by Utility Week magazine 
vat! address key issues facing the utility 
industry. Speakers include. Pful Nolan. 
Transco: Keith Oirhisoo. Electricity 
Supply Association of Australia; John 
Easion. Edison; Chris McUor. Anglian 
Water; John Roberts. Electricity 
Association. Mike Beaus. London 
Electr i c i ty 

Tot- +44 iftl 652.3818 
Fax- +44 1816523482 
E-mail: angeb.joaes@rtii.co.uk 

BRIGHTON 


Financial Analysts Seminar * 
ASIA 

With the pace of changa in global 
investing, and with the particular 
uncnrttMlw In the Asian markets, 
investment professionals need to 
be armed with the most up-to-date 
tools in their search tor superior 
performance. This conference wil 
study and debate issues of critical 
mportance to global investors. 

Contact A1MR In the USA 
Tst: 1 (804)980-3668 ext. 1 23; 
Fax: 1(804)980-3634; 

Internet: wwtuJmrorg 


Hong Kong 


OCTOBER 21 -23 
International Institute at 
Communications Annual 
Conference 

Communications in an Era of 

Convergence 

The Netcasting Society 

Td: +44 111 38R 0671 
Fax: +44 171 3800623 
veronica 0 iicomoig 

Para del Prfndpi Hotel 
Rome, ITALY 

OCTOBER 22 

Public to Private Institutional 
Buyouts 

A seminar addressing the issues for 
smaller listed cotnpanie*. im: hiding the 
institutional investors' view of the 
process, the key drivers fora successful 
transaction and the legal issues arising. 
Contact; Heidic Beuoo 
at Speedily Bircham 
0171 353 3290 

LONDON 

OCTOBER 22 

Sustainable Business - The 
Benefits of Environmental 
and Social Reporting 

Distinguished speakers include Rt Hon 
Michael bleacher MP. Minister for the 
Environment. 

Sponsored by Shell UK Ltd. 

Contact Maureen Heath, 

BririshUbraty 
TeL 0171 412 7470 
Fax. 0171 4127947 
Emnih naureeoJofaQbLuk 

LONDON 


OCTOBER 27 & 28 
Money laundering - 
Identification and Prevention 

PrococaJ wrekshop on hpil requirements 
and prevention of loss due to criminal 
activities afTecting ihe financial services 
industry. Presenter Monica Bond, 
investigative accountant and leading 
expert in the field. A mus for Compline 
officers. MLROs. internal auditors and 
nsk usmagers. 

GBP 875JK) + VAT 

Lywood David Iniemationaf Ltd 

Tel; 44 iOiI732 463014 

Fax: 44 (0)1732 463015 

e-mail: training^ lywood-david.co.uk 

LONDON 


EARLS C0URT2, LONDON 
Trarellhig artien you coelil ba wraklitg 7 
Need to access idonnatloa Instantly? 
Retnm to btmts of g-mafis affcr a 
business trip? 

Cany mountains of paper and stffl not 
haw up-to-date iidunnatl on? 

If you answered yas to any of these 
questions, came to MDC & Remote 
98 to see the latest industry 
developments and success stories of 
matde data sokitians. 

hllp^wwiiiobBed 

Ticket hotfirw 01203 428484 
Fax 01203 428490 
e-msO tudUmaggaOrewlmpaco.uk 



Quota FT1 


incorporating 


Fraud and the Euro 

Could you bm at riak? 

January 1" 1899 wfl be F Day How 
does the knroducticn of tie Bho Nlect 
die potential for fraud, and how do you 
prot e c t against ip 

Ftor me flmttime these Issues w3 be 
systemstireay addressed by sartor 
tepreSertatives of teadteg Eurtpesn 
hstitutians, mafor corporates md 
inteinaticne) banks, induefing the 
European Comroiaswn. European 
System of Central Batts, B3RD, 
Europoi. KPMQ. Partes. Visa, among 
mnnyolhera. 

Senior executives responaijie far Ihatr 
orjanfealians' financial and operational 
integrity: risk pralBe or compSance 
s^xwvWon should not miss lhia 
defsttvo event at sudi a cnxxal time. 
Languages: Englsh anti French 
Contact: Jamie Harper 
Tel: +44 171 419 1000 
Fsk +44 171 419 1050 
www.fi rumeinlfra ucLcom 

IFex 

Palais itoCtMBriti, BitiSSelS 


NOVEMBER 23 & 24 
FT Moroccan 
Telecommunications 

This major FT Conference will review 
telecoms liberalisation in Morocco and 
examine new opportunities Tor foreign 
business and Inves tme nt ax the ‘""d**’ 1 
opens up. Supported by the Moroccan 
Government, speakers include key 
ministers, international operators, 
equipment supplier*, bankers and 
mvesian. 

Tel: 0171 873 3162 

Fax: 0171 873 3067 

E-mail: cBtherine.macsweeney^tLcom 

wwwJtcMfereoces.com 

MARRAKESH 


DECEMBER 2 -4 
Venture Forum Europe 

Arranged by FT ConfcrenA* and 
Venture Economics the Qthlnonal 
Venture Forum Europe will mtvulc 
industry leaders with an imptrtani 
opportunity in increase ibeir 
undersianding or the European venire 
capital marketplace. 

Enquiries: Stan Fancoun 
TekUlTl 873 3262 Fax: 0171 813 3\67 
e-mail: sian (ancxniiti^n.com 
www. fiennterenccsxom 

LONI 


Si 


Africa Economic Forum ‘98 


The Window for Investment, 

Trade and Infrastructure Development 
Washington, D.C. 

Wednesday and Thursday, October 7 and 8, 1998 

Mayflower Hotel 
1727 Connecticut Ave. N.W. 

Washington D.C. 20036 

ORGANIZED BY: 

O.A.U/AEC, UNIDO, US- Africa Chamber of Commerce 
The World Bank Group, WorldSpace 

CONFERENCE AGENDA AND TOPICS 
Day One: 

■ Oparung Session • FORUM ONE: Scenarios for Cooperation with Africa on Investment, Trade and 
Related Issues • Lunch with Keynote Speakers - Two Afncan Presidents • FORUM TWO: Positive 
Trends in Afnea: Emerging Martlets. Prospects and Challenges • FORUM THREE: Overview of 
Sectorial Business Opportunities in Africa * Reception • Private Sector Award. 

Day Two: 

■ Opening Session • FORUM ONE: Qne-on-One Business • FORUM TWO: Overview of Infrastructure 

• Business Opportunities in Africa • Lunch with African Presidents • FORUM THREE: Business Forum: 
One-on -One Match MaJang on Pre-identttied Investment Projects • FORUM FOUR: Establishing the 
Environment for Sustainable Development • Closing Session Highlights of Recommendations of Fora 

• Press Conference. 

Special Focus On: 

• Vinous African Countries from West Edit, North and Southern Africa * One-on-One Business Match 
Making - Existing Mechanism la Facflftale Investment and Trade Flows to Africa 

Special Invited Guests, Participants and Keynote Speakers: 

President * Vce-P resident • Secretary Generals • Director Generals -Cabinet Members • Members of 
Congress • Finance and Trade Ministers • CEO's of Major Corporations * International Financial 
Institutions • Hoods of international Organization • Specie! Guests* Consultants, etc. 


For more in/nmioitm nmiot 

UJL-Afriea Chamber of Co mm er c e 
1899 L Street, N.W., Fifth Floor, Washington, D.C. 20036 
Tel: (202) 331-7053 • Fax: (202) 331-1809 


BC'98 
The first of ite kind to ba held ri 
Europe, The European Investment 
Congress wB provide rmrestora 
from arowd die globe with a 
unique opportunty to hear from 
Chairmen, Chief Executive Officers 
and Chief FnandaJ Officers from 
up to 50 of Europe's top companies 
in a highly concentrated and cost- 
effoctive timeframe. 

For a pioyi amine and in ytalnUJ on 
form contact Emma Airiay, 
Meeting Makars Ltd, 

Jontanhm Campus, 

76 SoutHbraa Drive, 

Glasgow G131PP 
Tel: +44(0) 141 434 1500 
F«C +44(0)141 434 1519 
Emafcelc960maaflng m»ltere ooLUk 
Web: http://Www.afc4JTO.uk/e4c 


Edinburgh 


OCTOBER 28 

The 3rd Annual FT Diamonds 
Conference 

Confirmed speakers include Mr Tim 
Capon. Director. Dc Baav Mr Jama R 
Rotfiwril. BHP Diamonds fact Mr Paulina 
Naso, Managing Director: END1AMA. 
Enquiries: Sion Fanroon 
Tet 0171 873 3262 fox: 0171 873 3067 
E-mail: uaiUoirauniiMLcorn 
wwwAcoofemiccs.cmn 

ANTWERP 

OCTOBER 28 -30 
Institute of Personnel and 
Development National 
Conference and Exhibition 

Managing People: Generating Success 
Firmly established as Europe's largest 
and nw-4 influential management event. 
Ihuv year's conference theme “Managing 
People: Genera hub Success" recognises 
key contribution or people to HWai ruble 
competitive advantage. Key speakers 
include: Jay Conger, Gary Hamel. 
Professor Karen Stephenson. Ane de 
Gens and Professor Tony Hope. 
Conference and Exftibinoo enquiries, 
conracl I PD 

Tet 0181 263 3434 Fax: OIRl 263 3366 
HARROGATE 


NOVEMBER 12 -13 
Global Cybercrime 98 
The Implications Tor 
Corpo rale. Computer 
and National Security 
This aafaence. the fin* an cybercrime 
in Europe, will feature 24 internationally 
acclaimed speakers who win highlight 
the staggering scale of the menace, 
describe tbe international combat in 
progress against it, and deed protection 
odd solutions. 

Mackenzie Kinmoiu Conferences 
Tel: +44 171 703 6<WS 
Fax: +44 171 753 2848 
Email: imqmtyweybercrimeco.uk 

LONDON 


DECEMBER 1 &2 
18th FT World 
Telecommu nications 
Competition and convergence will be 
the two main themes of the 1998 FT 
World Telecoms Conference. Speakers 
include Sir loin Vallance, Out (man. BT 
pic: Mr Cary Forsee. President and 
CEO, Global One SA: Mr David 
Edmonds, Director General. OfleL 
Enquiries: Sian Fancoun 
Tel: 017 1 873 3262 
Rue 0171 873 3067 
e-mail: siafl- f-Hrcoum? ft.com 
www.ftcoDferencciaxn 

LONDON 


LANGUAGE 

COURSES 


LANGUAGES 
FOR BUSINESS! 

• Tatoed notion lor buaness people 

• Courses for ndraduats and groups 

• Jrwompany or at Our centres n 
London. Oxford, Bnghton. Kent and 
Ednbuign 

• Expert teachng in over 40 
languages nduikng Engksh 

Rogont Unguaphona 
31 John Adam SL. London WC2N 6HX 
Teteohone: 0171 839 3622 
Fax: 01 71 839 3677 


16 -27 November 1998 

2 WEEKS DIPLOMA IN 

BANK MANAGEMENT 

at 

Robert fanreniy Oterenritj 
Zurich S wiUmhiu d 

Surviac in a hyper-coniiiciiiive wotkL 
Come and team wiih ia how lo oubluh 
ae» owpeolm uudonls and otaun nor 
SwIii Diptona In Bank Management 
mralinp ™ » cmlrti for lunber xudlo 

-i* our LI ni "Ci wry. 

Bant, need high quality maaagen u 
eccccd We will help you do /afl OnL 
The nro counc Tor Diphraias tn Bank 
Managemcm will he held in oar Csslk 
Gunpa iChasun Mctaer. Sierra! from 
Ntnanhcr 16 m 27 IW8. 

A hmhed number of placet am avmhHe. 
A«k for uur pragmanne and applrcanon 
few admJswMi 

Cmrex Kohcn Kcmedi> IMvenav 
44| I >H3908 Tctefin +11 I 30L33«J 
E-Mail A rtmrwio e^ Xamcihrt ln i up in yenn 
Onenr Pmcntir Mrwkjcrosdyiubuerrilyjeoni 
Mat Kemmeif IMmsiiy 
A Prmae Smu Unhemi? 
devnted m quality edunakn 


COURSES 


OCTOBER 5 - 7 
OlnMn-p anmr alnmmncMtn e wiad i/ n 
Understanding Derivatives 

• Background and Development of 
Derivatives • Market, - Financial 
Inslrarocols and Credit Rid: • OTC v 
Exchange Traded Instruments ■ Interest 
Rare Derivatives. Financial Futures. 
FRAs and Swaps, Swaptions » Currency 
Denvanvea, 'Exotic' and Standard 
Currency Oplion, Cnrrcncy Swaps 

• Equity and Commodity Derivative 
3 D>jr£M5+VAT 

Coftracr Birchin Traimog * Coosniiing 
1-6 Lombard Su EC3V 9AA. London 
Tet 0171 929 6633 Fax 0171 929 6M4 
Email: bucfain0btrefam.eofn 
LONDON 


OCTOBER 12 - NOVEMBER 30 
FT-Ctty Course 

The FT-Oly Courrc. which takes place 
over 8 weekly afternoon sessions, 
provides an excelled introduction to the 
City of London as a major financial and 
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in spite of a burst of activity, the Swedish business dynasty is not 
changing direction, Tim Burt learns 


No one at Investor could 
P _ or would explain. Why is 
Marcus Wallenberg nick- 
named “Husky”? 

There is nothing remotely 
husky about the demeanour of 
Investor’s deputy chief executive, 
one of the most powerful mem- 
bers of Sweden's Wallenberg 
business dynasty. And there is 
nothing of the pack anim al in his 
business dealings at Investor, the 
Wallenberg family's main invest- 
ment vehicle- 

“It is a cliildhood thing, some- 
thing he does not talk about,” 
says one Investor insider. 

Mr Wallenberg draws the line 
at discussing such family mat- 
ters. co nfinin g himself instead to 
the business in band - the per- 
formance of the Investor portfo- 
lio, which holds controlling 
stakes in companies accounting 
for more than 40 per cent of the 
Swedish stock market. 

Like many of his fellow execu- 
tives, Mr Wallenberg has been 
greatly exercised by negative 
stock market sentiment towards 
Investor. Its shares have fallen 
more than 30 per cent during the 
past three months and it has 
traded at a discount to net assets 
for as long as most analysts can 
remember. 

Critics of the Investor regime, 
which has held stakes in compa- 
nies such as engineers SKF and 
Atlas Copco since 1916, claim it 
has been slow to react to market 
turmoil. They argue that Investor 
would be better broken up into 
smaller investment trusts, each 
focusing on areas of industry’, 
venture capital or start-ups. 

Mr Wallenberg - a board direc- 
tor of eight companies in the 
Wallenberg portfolio, including 
telecoms giant Ericsson, and 
Astra, the pharmaceutical group 
- listens politely to such criti- 
cism. Then he cuts it dead. 

“Listen, we are not going to 
become a mutual fund or invest- 
ment trust. That is not an option 
and it completely Ignores our 
long-term perspective towards 
industry.” That lies at the heart 
of the Wallenberg philosophy. 

Almost every member of the 
family has been schooled in the 
long-term mantra: selling down 
stakes in underperforming stocks 


is anathema. Businesses deserve 
turning round, says Mr Wallen- 
berg; they do not benefit from 
crude financial engineering. 

In recent months there have 
been signs of a fresh wind blow- 
ing through Investor, following 
the appointment last year of 
Percy Baraevtk as chairman. 

Mr Barnevik. the first non- 
family member to hold the title, 
was brought in by Peter Wallen- 
berg - the family patriarch and 
Marcus's uncle - to prepare 
Investor for the 2 1st century. 

The Swedish industrialist, 
famed for bis restructuring of 
engineering group ABB, has done 
so by introducing the so-called 
Barnevik “triple jump”. First, a 
business is restructured; Calling 
that, the management is 
changed; lastly, you either sell 
out or merge it 

In short order, administering 
that medicine has seen Investor 
sell a 36 per cent stake in Saab 
Aerospace to British Aerospace. 


while floating the remainder. 
Stora, the paper group, has 
announced a $&J5bn merger with 
Enso of Finland. Astra has rene- 
gotiated its US joint venture with 
Merck, The chief executive of 
SKF has been dismissed. 


‘If the world 
around us is 
spinning faster 
and faster, we must 
react’ 


And overseas directors and new 
corporate governance rules have 
been adopted by Investor 
companies. 

Mr Wallenberg, however, 
denies that the burst of activity 
signals a change of direction 
or an end to the family's 


Marcus Wallenberg: Essential Guide 


Dispatched abroad: Unlike his 
father and forefathers, Marcus 
Wallenberg arrived in the 
boardroom of Europe's most 
powerful industrial dynasty after 
a financial apprenticeship almost 
exclusively overseas. 

With cousin Jacob - chairman 
of Skandinaviska Enskilda 
Banken - Marcus was 
dispatched to the US soon after 
graduating from the Royal 
Swedish Naval Academy in the 
late 1970s. 

Turbo-charged: Although his 
stint at Georgetown University 
was intended to broaden 
horizons, Marcus underlined his 
Swedish roots by arriving on 
campus in a black Saab, with 
“Husky” on the number plate. 

Finishing school: Marcus 
obtained a BSc in international 
business before beginning his 
career. Peter Wallenberg, his 
uncle and patriarch of me family 
empire, was determined that “the 
boys" - as Marcus and Jacob 
were known - would cut their 
management teeth in a 
non-Swedish environment. 


For Marcus, that meant a rapid 
“finishing school’ at some of the 
world's largest financial 
institutions. Between 1980 and 
! 1985. he worked at Citibank in 
New York, Deutsche Bank in 
Frankfurt and Hamburg, 

S.G. Warburg in London and 
Citicorp in Hong Kong. 

Takes advice: “Marcus does 
not profess to be an intellectual 
or the smartest person around,” 
recalls one London banker. “But 
he proved very shrewd and 
willing to take time to listen to 
the right advice." 

Since then, the 42-year-old 
sailing and hunting enthusiast 
has been a central fixture of the 
Wallenberg portfolio. He served 
his time at SE-Banken in 
Stockholm and London, before 
gaining manufacturing experience 
in the early 1990s at the German 
subsidiary of Store, the 
Investor-controlled paper group. 

Crown prince: He has 
emerged - along wctfi his cousin 
Jacob - ready to assume the top 
Wallenberg job should it come 
his way. 


MANAGEMENT MENTORING 


Many a pitfall in the 
path of the adviser 


It can be torture for a protege. Victoria Griffith 
is advised on what makes a successful mentor 


M Everyone is talking about 
mentors these days: it 
■At-® seems you must be one 
and have one to get ahead. Yet 
according to Chip Beli. author of 
Managers as Mentors*, recently 
published as a paperback, most 
attempts at mentoring are so 
clumsy, they turn into torture 
sessions for the protest. 

Some mentors fail because they 
are too patronising, says Mr BelL 
others because they are too over- 
bearing. One of his early mentors 
was a disaster because he was 
too helpful. “He was so con- 
cerned about me making a mis- 
take that he would rush in and 
rescue me before I had a chance 
to figure It out on ray own.” 

Even positive qualities can be 
problematic. Mentors should 
beware of the role of comedian, 
for example, as it can get in the 
way or learning. “A few jokes con 
crack the ice." says Mr Bell. “But 
if there's more laughter than 
foaming, there's a problem.” 


Mentors can also lead their pro- 
teges astray by doing too much 
cheerleading. Short-term excite- 
ment quickly dissipates. Mr BeD 
explains, if the protegS gains a 
false sense of security. 

Getting the relationship right 
is vital for mentor and protege 
alike, as companies increasingly 
see such on-the-job guidance as 
the best way to train employees. 
The success or General Electric 
of the US is sometimes attributed 
to ebairman Jack Welch’s suc- 
cess as a mentor. “Jack Welch 
knows just how to get the best 
out of people by encouraging 
them to learn as they go,” says 
Mr Bell. 

The best way of becoming a 
good mentor, he says, is to 
become a good listener, push 
employees to take risks, and give 
good feedback. Constructive criti- 
cism is just as important as 
encouragement. "A lot of people 
think being a good mentor means 
never saying anything negative. 


Are you a good mentor? 


1 When it comes to celebrations, 
most organisations need: 

A fewer B more 

2 When 1 evaluate people, my 
decisions are based on: 

A mercy B justice 

3 Leaders should be more con- 
cerned about employees’: 

A rights B feelings 

4 When people I depend on 
make mistakes, l am typically: 

A patient B impatient 

5 In general, I prefer 

A the theatre B a party 

6 In a conflict, my emotional fuse 
is usually: 

A long B short 

7 1 prefer to express myself to 


others in ways that are: 

A indirect B direct 

8 When l am Warned for some- 
thing I did not cause, my initial 
reaction is to: 

A listen B defend 

9 People are likely to see me as: 
A firm 8 warm 

10 My work and social life are: 

A separate B often overlap 

More than five Bs? You are prob- 
ably a great mentor, although you 
should be careful not to over- 
whelm your protege. 

Fewer than five Bs? You will 
have to become more open and 
candid to be a good mentor. 


What that does is just create a 
dishonest relationship.” 

Establishing rapport is impor- 
tant. Even very different individ- 
uals can usually find common 
interests. Mr Bell describes the 
relationship between Jack Gam- 
ble. an outgoing southerner, with 
Tracy Black, a sombre north- 
erner. at a Georgia plant of com- 
puter company Grade- Omar. The 
two discovered they shared an 
interest in hunting. Exchanging 
copies of the hunting magazine 
Field and Stream helped bridge 
the gap. 

The role of the mentor is 
changing, says Mr BelL As corpo- 
rations become more decentral- 
ised. mentoring may need to be 
conducted long distance. Some 
relationships may be completely 
milked in a few sessions; others 
may nourish over a decade. Some 
managers, however - perhaps as 
many as 30 per cent, in Mr Bell's | 
estimation - will never be good 
mentors because they do not 
relate well to other people. The • 
rest need a lot of guidance. 

The hierarchical nature of 
mentoring is disappearing as 
organisations flatten. The ideal 
teacher is not necessarily some- 
one a few rungs up the ladder. 
One of the most successful learn- 
ing relationships Mr Bell says he 
has seen was the general man- 
ager of a Marriott hotel, who 
asked an entry-level front desk 
clerk to help her improve her pre- 
sentation to customers. 

The manager had an abrasive 
style, and saw in the desk clerk 
something she could learn from. 

A mentor doesn't necessarily 
have to be your superior.” 

* Managers as Mentors by Chip 
BelL Published in US by Berrett- 
Koe/iler (SI&95). UK by McCrmo 
Hilt 1S12.99). Or FT Bookshop: 
FreeCal! 0500 500 635 (UK) or ±44 
IS) 324 5511 t outside UKX Free 
p&p in UK. 


affection for long-term holdings. 

“1 see no contradiction in act- 
ing faster while maintaining the 

long-term view," he adds. “If the 
world around us is spinning fas- 
ter and faster, we must react But 
we will not leave companies sim- 
ply because their sector is out of 
fashion.” 

He also plays down the Banne- 
vik effect “Had it been my unde 
or Percy facing this situation, the 
decisions would still have been 
taken. Percy has a different way' 
of working and be adds a global 
perspective. But it is not a revo- 
lution.” 

Mr Wallenberg, deputy chair- 
man of aircraft group Saab and 
papermaker Stora, adds that 
some of the recent deals under- 
line the family's determination 
not to exit stocks which many 
analysts regard as low margin 
and mature. 

Saab, he maintains, can play a 
leading role in the consolidation 
of the European defence industry 
and has some world-leading aero- 
space technology. Stora, mean- 
while. has emerged as Europe’s 
largest volume paper group in 
combination with Enso and 
promises strong growth 
in a highly fragmented 
industry. 

"We don't hold on to compa- 
nies for nostalgic reasons. But we 
give them a chance to change for 
the better - that is what they are 
all striving for." 

One investment banker says 
Marcus has assumed responsibil- 
ity for championing the family 
values within Investor, along 
with cousin Jacob, who joined 
Investor's board this year. 

"They believe if they just cut 
and thrust like any other institu- 
tional shareholder, they would 
make short-term gains at the 
expense of Industrial influence 
which has taken almost a cen- 
tury to build," according to the 
banker, who asked not to 
be named. 

Another adviser says Marcus 
and Jacob - both being groomed 
as possible successors to Mr Bar- 
nevik - manage the business in a 
rather feudal manner, expecting 
strong loyalty and service from 
those below them. 

“They have a huge fear of 
screwing it up, and regard then- 
current roles as heirlooms which 
must be preserved for the next 


m±- 



7 




.> . . . . i . . 


'■ - * 


generation." he adds. “But they 
also realise the world has 
changed since Peter's days 
as chairman, and they 
have got to modernise it,” 
Marcus and Claes DahlbSck, 
Investor's long-serving chief 
executive, intend to do so by pla- 
cing up to 15 per cent of Inves- 
tor's SKrlOObn (£7.6bn) portfolio 
in private equity investments, 
leveraged buy-outs of medium- 


sized businesses and 
start-up companies. 

So far, about SKrTbn has been 
invested In that effort, mostly 
outside Sweden. “We are doing 
quite well on the private equity 
side, but new Investments take 
time to deliver," says Mr Wallen- 
berg. “We are also trying to beef 
up resources to find more 
investments in information 
technology and healthcare - two 


of our main growth areas.” 

in the meantime, he empha- 
sises that Investor will continue 
to refresh its portfolio - as it bas 
done during 80 years. 

“We have been through an 
intensive period and we are 
doing our best to perform," says 
Mr Wallenberg. "But we are not 
going to change our ownership 
philosophy, you will have to wait 
a long time for that" 


a.- - 

. -■ 'V‘ 



' V.; 


LUCY KELLAWAY 


The wise company of fools 


Modem bosses are surrounded by people who are either sycophants or 
enemies; what they need is someone who will tell them the truth 


Ageing Manager seeks 
appointment as court jester or fool 
to chief executive of large public 
company. WSil provide own 
bladders and fool 's cap. 

This curious advertisement 
caught my eye in Director 
magazine. I faxed the number 
and tracked down the jester who 
turned out to be a military type 
wbo had done time in a couple of 
multinationals. According to 
him, chief executives need fools 
just as much as kings used to. 
Modem bosses are surrounded by 
people who are either sycophants 
or enemies; what they need is 
someone who will tell them the 
truth, be their conscience. That 
someone needs to be outside the 
hierarchy, fearless and worldly 
wise. In short, he or she needs to 
beafooL 

Great idea, 1 said. How many 
for-sighted chief executives have 
responded to the ad? Er, only 
journalists so far, he said. 

And that is just the trouble. 
Chief executives may need fools, 
but they are most unlikely to 
want them. The last thing the 
average chief executive wants to 
be reminded of as he sits trying 
to pen his annual message to 
shareholders is the truth. It is 
surely bad enough balancing all 
the demands of the job without 
an irritating voice reminding you 
of all the things you are working 
so bard to forget. 


Think. What is so great about 
your job and your employer? Got 
tt? Good. Write it down in a 
snappy phrase, and you have 
created a brand. Not any old 
brand, an EVP, an Employee 


Value Proposition. This idea 
comes from McKinsey and is 
intended to help companies hire 
and keep the best people. 

According to the Harvard 
Business Review. McKinsey has 
been addressing the problem or 
nurturing talent. 

The consultant has come up ' 
with several ideas: pay the best 
people well, weed out the 
mediocre, make line managers 
responsible for developing those 
below them. These suggestions 
are so obvious that surely you 
don’t need to be McKinsey to 
come up with them. Thus the 
consultant has tacked on this 
fancy EVP idea. “It's a brand 
positioning aimed at employees 
rather than customers." is how a 
principal at McKinsey puts it. 

All of which reminds me of 
something the great Peter 
Drucker said to Fortune 
magazine. According to him 90 
per cent of all jobs are boring and 


repetitive. It is because managers 
are so bored, says Drucker, that 
they succumb so easily to every 
new craze. - 
Were Drucker to think up an 
EVP it would along the following 
lines: “Come work with us. We 
are so bored that we spend our 
lives thinking up EVPs”. 


I like the UK government's idea 
of encouraging companies to set 
up libraries for their workers. It 
would not cost much: most of the 
I books could be supplied by the 
workers - all those Stephen 
Hawking and Don DeLlllo that 
you know you are never going to 
read. The public library no longer 
fits In with most workers' lives: it 
is always closed due to staff 
shortages, and most of the books 
have their pages glued together 
with baked beans - or worse. 

Less bright is the 



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books-for-bables idea. Retailers 
Sainsbury's and Boots are trying 
to suck up to the government by 
giving books to the under-ones. 
In my experience the under-ones 
love books; that is, they love to 
chew" EBem and t earth em. 

There are lots of explanations 
for the fact that we Brits are so 
illiterate. Our failure to start 
reading while still in nappies 
happens not to be one of them. 


Today’s post brought a letter 
from Sir Stuart Hampson, the 
boss of the John Lewis stores arid 
chairman of something called the 
Centre for Tomorrow’s Company. 

“Dear Ms Kellway” (sic), he 
wrote. "I am writing to extend 
you a personal invitation to be 
associated with Tomorrow's 
Company. There is increasing 
evidence that we are succeeding 
in making ‘tnelusiveness’ part of 
the language of business." 

So far so bad. One spelling 
mistake, one grammatical 
mistake, one stylistic nightmare. 

Then I realised this very 
personal invitation was for me to 
part with my money. Not only 
does this organisation need 
funding For research, it needs to 
“provide speakers for platforms 
(over 100 a year)". The idea that I 
should give money so they can 
pay some jumped-up expert to 
preach inclusivity (inclusiveness? 
both nouns are dreadful) takes 
some beating. This was the 
fourth request for money in four 
hours. The others were from: my 
old college: the junkie who camps 
out at the bottom of our street: 
and a man in the Underground 
shaking a can. So far I have 
given nothing to any of them. 

But the first three at least made 
me fed guilty. 


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12 


★ 



FINANCIAL TIMES MONDAY SEPTEMBER 21 1995 


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INSIDE TRACK 


BUSINESS EDUCATION LAURA TYSON 


Political mover ready 
to shake up Berkeley 


Christopher Parkes finds Clinton’s former economic adviser 
has firm ideas on how to move the Haas School up the rankings 


■ftn A gaggle of 
international socialist 

students Is doing Its 
bit to maintain UC Berke- 
ley's radical traditions. In 
baggy pants, ragged haircuts 
and fine voice, they can just 
be beard beyond the fire 
exit, ranting about the “job 
killer" at the podium inside 
the Haas School of Business. 

But Laura D ’Andrea 
Tyson, the school's new 
dean, seated uncomfortably 
close to the door, affects not 
to hear. Her former col- 
league Alan Greenspan haB 
all her attention. 

Despite the deepening cri- 
sis, Mr Greenspan, chairman 
of the federal reserve, has 
kept a promise to his friend, 
the former national eco- 
nomic adviser to President 
Clinton, who left the White 
House at the end of 1996. 

He has other business in 
San Ftancisco. He will later 
Join Robert Rubin, treasury 
secretary, in trying to per- 
suade Kiichi Miyazawa, his 
counterpart from Tokyo, of 
the need for economic 
reforms in Japan. But first, 
he will help Ms Tyson with 
her own reform project at 
Haas. 

Media coverage of the visit 
from the most Important 
monetary policy maker in 
the world is a coup for the 
modestly-ranked manage- 
ment school, bringing It 
exactly the sort of status- 
building publicity It needs. 

The presence of Ms Tyson 
has already brought an air of 
professionalism to this cor- 
ner of the University of Cal- 
ifornia, Berkeley campus. 

Her agenda is as sparse as 
her still-unfurnished office: 
in five years - more likely 
less - she intends to elevate 
Haas from its position as 
about the lQth-ranked US 
business school to a Blot 
more In line with that of 
Berkeley as a whole. 

“UC Berkeley has the larg- 
est number of graduate pro- 
grammes ranked one, two or 
three in the US: better than 


Harvard and MIT. I mean 
we’re it! 1 * she says. 

Among business schools, 
Haas rates fourth in quality 
of students, but the under- 
staffed faculty is only 
seventh, and, Ms Tyson says. 
Berkeley deserves better. 

She started her term as 
dean In July encouraged by 
the “sense" that the univer- 
sity administrators were 
ready to buy into her convic- 
tion and, importantly, allow 
Haas the flexibility to find 
its own way ahead rather 
than fighting for scarce 
funds with other, more suc- 
cessful UCB schools. 

Recognition of the need for 
a new approach dates back 
to the late 1960s, when Calif- 
ornia was smitten by 
recession and a record bud- 
get deficit, she says. “If 
Berkeley is going to main- 
tain and strengthen its 
greatness, it is going to need 
more flexibility or autonomy 
in two senses," she says. 

One is to glean more reve- 
nues from nan-state sources, 
and the other Is to have 
more control over curricu- 
lum and management. Ms 
Tyson's cautious framing of 
her free market policy will 
mark a clear, and potentially 
politically fraught departure 
from established UC ways. 

"We come out of a tradi- 
tion where programmes are 
fUnded by the state, and the 
allocation of resources is 
basically run at campus 
level or at a [university] 
system-wide level with the 
Interests of the state in 
mind," she explains. 

At Haas, she sees possibili- 
ties for more endowments 
and revenue streams from 
self-supporting programmes 
beyond the usual daytime 
MBA and undergraduate 
courses. They include week- 
end and evening MBAs and 
lucrative offerings for execu- 
tives. 

Flexibility will include the 
ability for Haas to price its 
own “products" and retain 
at least some of the revenues 


to fund growth. Following 
the model established by 
some other public US univer 
sides, Haas would share its 
Income with the central 
campus, Ms Tyson proposes. 

“The ability of any individ- 
ual unit to run a programme 
is partly a result of using the 
Berkeley name and reputa- 
tion. We use Berkeley fedli- 
ties and think [sharing reve- 
nues] is a perfectly 
reasonable way to recognise 
that" 

How “reasonable” this 
approach is considered 
among Sacramento politi- 
cians and bureaucrats has 
yet to be tested, but Ms 
Tyson, a Democrat, has con- 
nections deep inside the US 
educational establishment, 
and her credentials - and 


‘While we can 
make the case for 
expanding here, 
we can’t make the 
decision’ 


diplomatic skills - have 
been greatly bolstered by her 
bout in Washington. 

She makes a persuasive 
“common cause" case that 
her plan is a sound way to 
enhance the fortunes of the 
UC flagship and the school 
in her charge. But she har- 
bours few doubts about the 
complexity of its promotion 
and execution. 

"Now. suppose we gener- 
ate revenue: can we use it in 
ways we think are most suit- 
able to improve the quality 
of education?" 

This bottom-line question 
raises big issues, she says, 
which will challenge the tra- 
dition. for example, that 
state-funding and faculty 
hiring are interdependent. 

But there are other “little 
issues" which must also be 
addressed, such as state con- 


trol over application fees. 
She claims a “huge increase" 
in applications means the 
school must divert more 
resources to processing 
them. “We want to charge 
more but It Is not something 
we can do unilaterally," she 
says. 

Haas wants to increase the 
size of the MBA programme 
(the fees are also fixed In 
Sacramento) but now needs 
permission from the state 
capital. 

“Business schools at Stan- 
ford (California's premier 
private university) and Har- 
vard are in major growth 
modes now, and while we 
can make the case for 
expanding here, we can’t 
make the decision." 

The case she makes high- 
lights Haas’s defirienrifs rel- 
ative to the leading business 
schools, which include over- 
reliance on adjuncts, outsid- 
ers and visitors to fill gaps 
in the faculty. And while Ms 
Tyson boasts of a strong 
core In professional educa- 
tion, Haas currently offers 
only a meagre range of elec- 
tive or optional courses. 

Main points of weakness 
include health, production 
and information technology 
management. Production 
technology courses are popu- 
lar, and half a dozen are 
offered in conjunction with 
the UCB engineering school. 
But while demand calls for 
more, “we don’t have the 
people power". 

Ms Tyson is shocked at the 
“dearth” of expertise on con- 
temporary China at Haas, 
given UCB’s location on the 
Pacific Rim, its big contin- 
gent of students of Asian ori- 
gin, current economic devel- 
opments. and Its tradition as 
a focus of Chinese immigra- 
tion. 

When viewed in terms of 
numbers, Haas' predicament 
appears even more alarming. 
According to an external 
review committee, the 
school ideally needs between 
20 and 26 new faculty mem- 
bers - up to 40 per cent more 
than now - to teach its 
existing student body. 



Ffehting talk: Tyson's free market Ideas may dash with accepted 
Calfornla concepts of how education should be funded AP 


Even reaching a provi- the smallest concentration of 
sional Interim target of six Haas people, it is by Car the 
additional staff would still, school’s biggest source of 
leave the school lagging private funds, 
behind rivals such as the Ms Tyson, still a regular 
Anderson School at UCLA, east coast visitor, has a tight 
Stanford and Michigan, schedule and will have no 
which Ms Tyson uses as her more compunction about 
benchmarks. railing on Haas's former stu- 

Haas still depends on the dents for cash than she had 
state for 42 per cent of its about summoning Mr Green- 
Income. Tuition and fees span to make his contribu- 
account for 43 per cent, with tion. And it may not be long 
9 per cent and 6 per cent before she herself is in a 
from endowments and position to help out 
annual gifts respectively. In education most of her 
Tradition, and the perce p- life, teaching at MIT, Prince- 
tion that education was paid ton and Harvard, she says 
for by taxes, have weighed the profession allowed her 
heavily on UC campuses, the flexibility to design her 
“These institutions were not career, 
built on philanthropy, and And although she 
never thought of going out acknowledges that her stint 
to find funds among in Washington qualified her 
alumni," Ms Tyson says. for a shift into the lucrative 
But that is changing even New York private sector, die 
before her scheme is once again chose the flexible 
approved. As part of UCB's option best suited to the 
“New Century Campaign", needs of her son, 13 years 
Haas is already 80 per cent old at the time, 
of the way towards raising Now, her boy is three 
Its quota of $75 m (£45.4m) years away from college, and 
towards a grand target of the presidential election and 
)2bn. fresh options loom. “I've told 

The spread of Haas alumni my colleagues HI see where 
has awakened them to the it’s at in three years. I’ll look 
importance of private sup- at the scenarios then and . 
port for education. And even may find I want to go some- I 
though New York is home to where else." 




mini 




NEWS FROM CAMPUS 



Said graduates 
competitive 
in any field 

Two graduating MBA 
students from the Said 
Business School, at Oxford 
University, are proving that 
they more than just 
proficient managers. 

Roopa UnnJkrashnan.bas. 
taken the gold medal for 
India in the Commonwealth 
Games in Malaysia In the 
women’s sports rifle event. 
The competition took place 
only a few days after Ms 
Unnlkrashnan completed her 
MBA course. 

Likewise fellow Oxford 
MBA Matthew An and flew 
out to Malaysia to compete 
in the 200km team cycle 
race for his native Canada. 
The team won a bronze. 

Said Business School: UK 
1865 228470 

Funding for 
student funds 

Wall Street financier Michael 
Price has given $2m (£1 ,2m) 
to New York University's 
Stem School of Business 
and the Michael Price 
College of Business at the 
University of Oklahoma to 
enable both Institutions to 
set up student-managed 
investment funds. 

The income generated by 
the fends will be used to 
provide scholarship and 
programme support for 
participants. The students 
selected to participate in 
running the funds will be 
known as Price scholars. 
Stem: www.stem.nyu.edu 

Fair choice of 
programmes 

For those Europeans 
overwhelmed by the choice 
of MBA programmes, the 
best place to start fn. 
selecting a programme may 
be one of this autumn’s 
MBA fairs. 

The Euro-MBA Tour *98. 
organised by the 


Professional Careers Group, 
starts In London on October 
7 aid then travels to Paris, 
Amsterdam, Munich and 
Madrid. 

By registering In advancer 
participants can meet 
representatives from some 
of the big recruiters as well 
as the business schools. 
Euro-MBA: 
www.topmba.com 

Environmental 

management 

For managers with a “green" 
turn of mind, the European 
Association for 
Environmental Management 
Education (EAEME), a 
grouping of European 
universities, Is running a 
European masters 
programme in environmental 
management. 

The one-year programme, 
which begins in October is 
project-based and can be 
taught in several European 
languages. Fifteen 
universities participate In 
EAEME. including Erasmus 
in the Netherlands, Imperial 
College In the UK and the 
University of Bologna in 
Italy. 

EAEME: www.Jrc.org/eaemel 

Family 

honour 

The Spanish luxury goods 
maker Puig will receive the 
1998 Distinguished Family 
Business World Award from 
IMD, in Switzerland, which 
specialises In executive 
training for members of 
family businesses. 

The Barcelona perfume 
and fashion house controls 
brands such as Nina Rlcd, 
Paco Rabane and Carolina 
Herrera. Previous winners of 
the award Include toy maker 
Lego and French fashion 
house Herm&s. 

Pulg, which wilt receive 
the award in Paris later this 
week, has been honoured 
for its geographical 
expansion. 

IMD: Switzerland, 

21 618 0111 


Information for News from Campus should be sent to Dofla Bradshaw, 

The Financial Times. One Southwark Bridge. London SE1 9HL 
Tel. 44 1 71 873 4673 Fax 44 171 873 3950 



■ The euro is on its way. Now that the ft offers local expertise in a global con- 

member states of the European Monetary text ■ Here too, DG BANK operates by 
Union (EMU) have been determined and a principle that makes every customer 
the European Central Bank a partner in a singular way. 

established in Frankfurt, Wb call it the WIR PRINZIP, 

Germany’s prominence as to which DG BANK and Its 

global financial is staff are wholeheartedly com- 

destined to further increase. mitted. It Is rooted in the clas- 

■ From its Frankfurt headquarters, sic tradition of the cooperative system 

linking equal business partners. And it 
has a great future. Because it exemplifies 


DG BANK is ideally positioned to help 
business gain a clearsighted view of the 


complex Euromarket. And with a presence the central idea of partnership: mutual 

in the world's major economic regions. cooperation leads to mutual success. 

H«ad Office: DG BANK. 13 0-60265 Frankfurt am Mein, Germany. Offices In: Amsterdam, Atlanta Bannkr. 1 , a-i.. 
Budapest Cayman Islands, Hong Kong, Jakarta, Johannesburg, London, Luxamboura Madrid 
Milan. Moscow. Mumbai (Bombay). New York. Paris. Prague, Sag Paulo, Seoul. ShanghJ?' Tokyo 


DGB4NK6 



FRJESHFIELDS 


FINANCIAL TIMES 

No FT, no comment 



European prize for the best 
business law student 

1998 


The FT/Freshfields European prize is open to students who are 
specialising in business law and are about to embark on their 
professional career. Heats will be held in London, Marseilles, 
Milan, Cologne, Brussels and Madrid, and the two winners 
from each heat will go through to the European final which 
will be held in Paris in December. 


If you would like to enter and have 


• Examination results which put you among the top 
business law students 

• A thorough knowledge of business law and a good 
understanding of EU law 

• A command of at least two European languages, 
including English 


please call one of the following people for more details 

Fiona Temby - London, +44 171 936 4000 
Florence Henriet - Paris, +33 1 44 56 44 56 
Annemie Vermeylen - Brussels, +32 2 504 7000 
Laura Hidalgo - Madrid, +34 91 319 1024 
Ottavfa Sitia - Milan, +39 02 625 301 
Christel Francke - Cologne, +49 221 20 50 70 
or see the FT/Freshfields Prize page on our website 
www.freshfields.com 


1st Prize 

the equivalent of 3000 
Euros plus six months' 
paid work experience in 
Europe 

2nd Prize 

the equivalent of 1 500 
Euros plus three 
months" paid work 
experience in Europe 

3rd Prize 

the equivalent of 750 
Euros plus three 
months' paid work 
experience in Europe 






FINANCIAL TIMES MONDAY SEPTEMBER 21 1998 


★ 


INSIDE TRACK 


aircraft seating 


Cacophony cancelled 



Mr Earl. “But we believe the 


Marcus Gibson 

looks at a headrest 
solution to aircraft 
cabin noise 

There are few more 

.'*V dispiriting sights 
■“ ^ than watching pas* 

senders disembark after a 
long-haul flight. Like a 
bunch of prisoners released 
from a long spell in captiv- 
ity. a line of weary strag- 
glers tramps through the 
arrivals lounge, their ears 
ringing from hours of inces- 
sant noise. 

But at last a solution to 
the problem of cabin noise is 
on its way. Ultra Electronics, 
a British company, has a 
noise-cancelling system for 
wide- body aircraft which, it 
claims, will halve the 
amount of perceived noise. 
Fitted into individual seat 
headrests, the “Ultra Quiet 
Seat" system consists of an 
active noise control unit 
linked to a set of tiny micro- 
phones and loudspeakers. 
The microphones relay the 
ambient noise level to a digi- 
tal signal processor, 
enabling the speakers to 
emit an identical sound con- 
tinuously in an inverse 
phase, which effectively can- 
cels out noise. 

While the system does not 
work If the passenger moves 
away from the headrest, it 
provides an effective if local- 
ised haven of relative peace. 
Mainstream aircraft pro- 
duced by Boeing and Airbus 
are not fitted with noise 
reduction systems, but Brit- 
ish Airways and Scandina- 
vian Airlines are in discus- 
sion with Ultra Electronics. 

"If passengers put their 
heads against the headrest 
they will experience signifi- 
cant improvements in com- 
fort," says Laurence Earl, 
Ultra's marketing manager. 
It also helps passengers hear 
what their immediate neigh- 
bour is saying. 

At $500 (£300) a seat. 
Ultra's interior "hush kits" 
are clearly aimed at the busi- 
ness traveller. "Major opera- 
tors have so far concentrated 
on fitting bigger seats,” says 


introduction of a much 
quieter seat will give airlines 
a significant competitive 
advantage." 

Aerospace engineers say 
in-flight noise levels of wide- 
body aircraft such as a Boe- 
ing 747 stand at about 80 
decibels, caused mostly by 
passing air. exhaust noise 
and even air conditioning, 
rather than jet engine noise 
or vibration. Although the 
new system produces a 
reduction of 10 decibels. 
Ultra Electronics says com- 
plex psycho-acoustic factors 
ensure travellers perceive a 
halving of noise levels. 

Since 1995 the Cambridge- 


based company, a world 
leader in noise reduction 
systems for civil aircraft, has 
fitted its equipment to about 
250 regional jet and turbo- 
prop aircraft, including the 
Bombardier Dash series, and 
Saab 340 and 2000 series. 
Noise in these aircraft types 
has been reduced to the 
same level as larger aircraft 
by fitting not headrest but 
full cabin- wide systems. 
These combat a different, 
more tonal and low- 
frequency type of noise and 
vibration - primarily from 
jet and turboprop engines. 
Utilising a sophisticated net- 
work of up to 72 micro- 
phones and vibration-sensi- 


tive attentuators mounted 
along the length of the fuse- 
lage. cabin-wide systems 
have muffled this once noto- 
riously loud class of aircraft. 

So successful has the exist- 
ing technology proved with 
industry operators, aircraft 
manufacturer Bombardier 
announced at the Fambor- 
ough Air Show earlier this 
month that it was renaming 
its Dash 100 aircraft as the 
Q100 series - Q for Quiet. If 
airlines respond quickly 
enough to passenger 
demands for markedly 
higher standards of comfort 
then flying long-haul will 
not be such a numbing test 
of endurance. 



TRAVEL UPDATE 


Manila visitors 
face further air 
disruption 

Travellers with business in 
Manila will face further 
disruption if, as threatened, 
Philippine Airlines shuts up 
shop altogether next 
Monday. A crisis forced by 
the Asian economic 
downturn and a crippling 
pilots' strike in July has 
already forced the carrier 
into a drastic pruning of 
international routes. It no 
longer flies to main 
European, Middle East or 
Australian cities. But it still 
operates to a number of 
Asian destinations - flying 
daily, for example, to 
Singapore, Hong Kong and 
Taipei - and to Los Angeles 
and San Francisco. If the 
airline bites the dust, 
passengers from the two 
West Coast cities wfll have 
to fly with Cathay Pacific via 
Hong Kong, where they will 
have to wait only one hour 
before continuing to Manila, 
with Northwest via Tokyo or 
Singapore Airlines via Taipei. 

Checking out 
frequent flyers 

An independent survey of 
eight frequent flyer 
programmes shows 
American Airlines and British 
Airways are the most 
generous - and Air France, 
Delta and Lufthansa the 
meanest, writes Gillian 
Upton. 

The comparison is based 
on the number of return 
economy flights between 
London and New York 
required to gain one free 
economy class return ticket 
to Amsterdam, Brussels, 
Dublin or Paris. According to 
the survey, you would need 
to fly 3.6 times to New York 
on Delta or Lufthansa and 
2.8 times on Air France to 
qualify. On British Airways 
the requirement would be 
only 0.6 times, and on 
American 1.4 times. In 
between are Virgin {1.7), 


United and Continental (2.1). 

The survey was 
undertaken by the 
International Airime 
Passengers Association, the 
independent business 
travellers’ organisation. 

A similar picture emerges 
if you want to earn one free 
business class ticket lapa 
says it takes 1J 2 trips 
between London and New 

York in economy class on 
British Airways, but 4.2 trips 
on Delta, 5.6 trips on Air 
France and 6.8 trips on 

Lufthansa. 

But check the snail print 
BA awards miles only to 
travellers buying a full-fare 
economy class ticket But 
you would qualify for miles 
on Air France and Lufthansa 
if you bought a promotional 
ticket 

Another big difference 
concerns who is allowed to 
use the accrued miles. 

British Airways specifies the 
member plus family but Air 
France members, for 
example, can nominate 
anybody. 

The lapa survey looked at 
travelling long-haul and 
enjoying a short-haul benefit. 
A survey on flying short-haul 
and earning a short-haul 
benefit would have given a 
different result; so too would 
flying long-haul and enjoying 
a long-haul benefit 

For example, you would 
need to take 9.7 trips in 
economy class on BA to 
New York to win an 


economy class ticket to the 
Big Apple. On Air France 
you would need to take only 
4.1 trips. 

Surfing rooms 

Business guests at about 
100 Choice hotels in 
Scandinavia are to be 
offered pre-paid cards 
“loaded" with internet surfing 

time. The system is already 
operating at some hotels 
and will soon be phased in 
at others throughout 
Norway, Sweden and 
Denmark. The cards, which 
also cover fax transmissions, 
cost £12 for one hour or £23 
for four hours. 

Guests at Copenhagen's 
grand Hotel d'Angleterre and 
Amsterdam's Hotel Okura 
are able to access the 
internet from their 
rooms. 

Virgin lounge 

Virgin Atlantic, which last 
week won permission from 
the Civil Aviation Authority to 
start flights between 
Heathrow and Moscow, 
tomorrow opens hs new 
lounge at Gatwick. 

The airline is expected to 
operate an A320 Airbus on 
the Russian route. It may not 
be able to launch the service 
in time for the switch to 
winter schedules on October 
25 but hopes to start flying 
at least four times a week 
soon afterwards. 


Likely weather In the leading business centres 


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China openings 

Marriott is to manage a 
531 -roam hotel in 
Chongqing, a manufacturing 
city in south-west China. 
The hotel is some 30 
minutes’ drive from the 
airport and will have five 
restaurants - serving 
Chinese, Japanese and 
western food - a swimming 
pool, fitness centre and 
meeting rooms. It is due to 
open in mid- 1999. 

Sheraton has opened a 
new hotel an hour's drive 
west of Shanghai in Suzhou. 

Debonair launch 

Debonair, the UK carrier, is 
to launch what it claims are 
the first scheduled flights to 
Paris Express airport at 
Cergy-Pontoise, north of the 
capital near La Defense. The 
carrier starts the daily 
services from its Luton base 
to Paris Express airport, 
which is about 35 minutes 
from the centre of town by 
taxi or RER train, on 
November 16. 

Oslo switch 

Oslo's new international 
airport at Gardermoen will 
open on October 8. 
Operations will then switch 
from Fomebu which is to be 
closed. Gardermoen, 30 
miles north of the capital, is 
connected by rail. The 
journey will initially take 
30-35 minutes but it will 
be reduced to 20 minutes 
when a high-speed link is 
opened. 

Rotterdam flight 

New flights between 
Manchester and Rotterdam 
are being launched today. 
The three-times daily service 
is a joint venture between 
KLM uk. the Dutch airline's 
British arm, and 
Antwerp-based VLM. The 
two carriers run a joint 
operation between London 
City Airport and Rotterdam. 

Roger Bray 



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14 



TIM JACKSON 

ON THE WEB 


Six degrees 
from success 


Two online 
companies with a 
single shatterlngly 
simple idea are 
prospering 

"If you build it, they will 
come,” says one of the 
characters in the movie 
Field of Dreams . Taking bis 
advice, the sports-mad 
former played by Kevin 
Costner installs a full-size 
baseball diamond in one of 
his cornfields. 

On the internet, this 
advice is exactly the 
opposite of what smart 
companies do. To see why, 
look at wujw.sixdegrees.com, 
a web site set up by New 
York-based Macro View. 

The idea behind the web 
site, borrowed from the play 
of the same name, is that 
everyone in the world is 
connected by a chain of 
mutual acquaintances no 
more than six people long. 

So if you have a question to 
answer, or a problem to 
solve, someone at the end of 
a chain of people who know 
people you know will be able 
to help. 

You join up by being 
invited into the site by an 
existing member who has 
named you as a connection. 
Once inside, you confirm the 
relationship they reported, 
and then have the 
opportunity to propose other 
people you know. This 
places you at the centre of a 
set of concentric circles of 
acquaintances, friends, 
colleagues and relatives, 
who can answer questions 
you post on a bulletin 
board. 

Unfortunately, there is an 
intellectual flaw at the heart 
of the idea. True though it 
may be that someone will 
help you because they are a 
friend of a friend fa 
second-degree connection), it 
is much less likely that a 
sixth-degree connection will 
be willing to help you simply 
because you are their 
friend's cousin’s client’s 
wife’s hairdresser’s mother. 

A technically superior 
implementation of the same 
idea can be found, at another 
web site run by a Pittsburgh 
company, which abbreviates 
the six-degrees-of-separation 
phrase to u7uw.6dos.com. 
Here, the rules of market 
economics are being 
harnessed; the system allows 
people to offer a reward for 
the answer to their question, 
and allows Intermediaries - 
the links in the chain - to 
take part of the reward for 
their port in forwarding the 
question to the person who 
can answer it. 

In February 1998. when 
these companies were last 
covered In this column, the 
New York company was 
winning despite the Daws in 
its idea. Andrew Weinrelch, 
its 30-year-old founder, 
argued that people would be 
more likely to participate in 
the system because it was 
cool than because they 


would make $10 from it. He 
cited 410,000 users of his 
service as evidence that he 
was righL 

Mr Weinreich's theory 
looks Increasingly 
compelling. Last month, the 
tmj}wMxdegrees.am site 
received 9m page views, and 
showed advertisements on 
about 80 per cent of the 
pages. This month, he says 
the page views are likely to 
top 14m; next month, 20m. 

The company signed its 
milli onth member earlier 
this month, and hopes to 
reach 2m by the end of 1998 
and 10m by the end of 1999. 

It now has 25 employees, and 
is trying to recruit another 
30. 

Mr Weinrelch also says he 
is about to close a new 
funding round, bringing in 
significant new money in 
addition to the $3.5m seed 
capital raised from 40 
high-net-worth New Yorkers 
that has paid the bills 
so for. 

In addition, Mr Weinrelch 
has rolled out some new 
services. Since the six 
degrees that gave the site its 
name are no longer central 
to the idea, the site now 
allows someone who wants 
to find a tennis partner 
living nearby to search the 
entire million-strong 
database, not merely friends 
of friends. The site also 
offers instant messaging 
between people using the 
web site at the same time, 
and an ability to look 
very widely at the 
concentric circles of contacts 
you have. 

Since signing on to the 
service, I have been irritated 
by the number of e-mailed 
messages sent to me by the 
system on behalf of people 
looking for apartments In 
New York. 

Mr Weinreich says the 
company plans to implement 
filters in the fourth quarter 
of 1998 which will allow 
users to say no thanks to 
certain categories of 
inquiries and questions, 
such as real estate. 

The difficulty, he says, is 
marrying the filters at both 
the receiving and the 
sending end. Most 
interestingly, he also plans 
to roll out "some kind of 
expert module” in which 
questions can be forwarded 
to self-appointed experts in 
given areas. 

If Mr Weinreich succeeds 
in doing so, this will offer 
conclusive proof of what 
should now be called the 
Field of Dreams theory. For 
sizdegrees.com was 
originally the underdog as 
measured by functionality. 
"There are two ways to build 
a company," he says. "You 
can build the technology and 
then go for the members, or 
build the membership and 
then flesh out the 
technology.” Mr Weinreich 
went for members - traffic 
growth - before all else. And 
he was righL 

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FINANCIAL TIMES MONDAY SEPTEMBER 21 1998 


INSIDE TRACK 




If" 






TECHNOLOGY UPDATE 

DATA DELIVERY BY SATELLITE 


Battle for 
the skies 
hots up 


Satellite TV operators 
pose a threat to 
the traditional 
VSAT suppliers, 
says George Cole 

THEN: Two years ago, the 
satellite data delivery mar- 
ket was growing in Europe. 
Satellite data systems 
deliver data and Internet 
content at high speeds to 
desktop PCs or network 
servers. The delivery process 
is much faster than tele- 
phone modems or even ISDN 
Ht gttai lines. 

Leading users of satellite 
data systems include the 
automotive, retail, banking 
and credit card sectors. 
These customers use a 
two-way linfc- known as 
VSAT (very small aperture 
terminal) which connects a 
PC to a satellite dish. 


Systems and Olivetti Tele- 
media formed Hughes Oli- 
vetti Telecom (.HOT), with 
the aim of offering 
companies high-speed multi- 
media services via satellite. 

The company says the sat- 
ellite data market accounts 
for about 4-5 per cent of the 
general telecommunications 
market and that this will 
double in the next 10-15 
years. By 2000. it predicts, 
every European business 
location will have a satellite 
receiver. 

HOT offers two satellite 
data services. 

HOTStar is a VSAT ser- 
vice designed to deliver data 
to branch or stores locations 


d via VSat s 
, encrypted and 
atriUte control 
be on the other 
k data my be 
BUM, or t!»u- 
multaotousij 
t systems siro- 
growing nua- 
ag multimedia 
i. test, speech 

is wen estab- 
we more than 
jus are la use. 
dug around 1 ' 
tb some WOJJOO 
i be in use by 
using VSat 
yster. Chevron. 
J and Toyota, 
as grown mm 
us ago, fewer 
wen in use. 
is nearer 10.000 
wted to double 
ile of Sears, 
rang used tors 
ms, and by var- 
ng the auiwao- 
and credii-cBnl 



SocUU Banptaw dm SstetaH, wNch gm Bw Mi writ* a* aaMBn, tans to offer m ktoneshm nuttiwBi nnriee 

George Cole looks at a flexible and cost-effective 
solution to traditional conimuxucations systems 

Delivery via the 
satellite route 


marten technology company, and 
British Telecom of the UK. The ser- 
vice. which began operating at the 

surt ot the year, is used id Unfc u 
sates, which communicate via e-mail 


because wwmy inking car compa- 
nies have hondreds or evan thou- 
sands of dealers scattered serosa 
various countries. Last October. 
General Motor’s Opel/VsoxtaJl unit 


tor. In Italy, the' bank o anaortim n 
tofrostrada'Cedartnotd has ordered 
almost 800 VSat terminals tor 
branch applications, indndinf its 
automated teller machine aetwodu 




after a abort] 
thUw0$.i 


DirecPC systems] 
.ore of then 
sttriert is 
which condno 
and share! 

A t 

dish. eLectrankj 
should coat 
Cfcok, with a-; 
of around DA 

Other 
mow Into the i 
Last month ! 

Sale Hites, 

serin of) 
to offer an 
service from i 
dre to be lav 

“We wfUmrt 
large bos 
retaQere.1 
ton," says ! 
general of Sea, 
opening In 
hone office]! 

Butdsat, 
operator, also 
based data se 
has developed 


media Network Terminals, 
says: "Television pictures 
are transmitted from satel- 
lites at speeds of up to 38 
megabits a second, so fast 
internet services are feasi- 
ble. I can see digital televi- 
sion viewers being offered a 
carousel of perhaps the top 
500 websites, which they 
could' request by a telephone 
connection to the broad- 
caster." 

The satellite operator 
Eutelsat (European Telecom- 
munications Satellite Organ- 
isation) bas developed Con- 
vergence!, a system which 
uses the European Digital 
Video Broadcasting (DVB) 
standard to deliver a mix of 
digital television pictures, 
internet content and multi- 

still growing, but traditional media materials via a Hot 


vast amounts of data. HOT 
says DirecPC has several 
applications, including 
“turbo" internet, which 
offers internet content at 
data speeds of up to 400 kbps 
(the fastest telephone 
modems offer speeds of 56 
kbpsi. enabling a 4Q0-page 
document to be delivered in 
less than a minute. 

High speed delivery makes 
satellites very cost- 
effective when compared 


‘I can see digital TV viewers being 
offered a carouse) of the top 500 
websites, which they could request 


now: The vsat market is by a telephone connection' 


VSAT suppliers are being 
challenged by satellite TV 
operators, who are also plan- 
ning to offer fast data ser- 
vices. along with digital tele- 
vision programmes. Satellite 
data services used to be 
aimed at corporate groups, 
but small and medium-sized 
companies and even individ- 
ual consumers are now seen 
as potential users. 

In 1994, Hughes Network 


on a national or pan-Euro- 
pean basis. 

DirecPC is a satellite 
broadcast service which uses 
a PC card and a small satel- 
lite dish (60-80cm) costing 
about £590. 

The cost of the DirecPC 
service varies from £25 a 
month for consumer users to 
more than £2,000 a month for 
companies needing to deliver 


with other systems, 
says HOT. 

At the same time, the 
growth of digital TV services 
across Europe has led to 
interest in delivering inter- 
net content as well as pro- 
grammes. 

Helmut Stein, senior 
vice-president of the new 
technology and operations 
division at Nokia Multi- 


Bird satellite. 

By using a DVB-compliant 
set-top box, a PC card, dish 
and software, users will be 
able to access Internet pages 
on their PC and digital TV 
programmes on a television. 

Future versions of Conver- 
gence! will allow users to 
view internet content on 
their TV, and to watch 
television programmes on 
their PC. 


Eutelsat is running a pilot 
service In the UK, with part- 
ners BT Broadcast Services 
and the internet service pro- 
vider EasyneL 

The Luxembourg-based 
satellite company Soci6t£ 
Europfienne des Satellites. 
(SES), which owns the Astra 
series of satellites, may be 
one of the largest satellite 
TV operators, but the com- 
pany also has its sights set 
elsewhere. 

"Markets such as data 
delivery and multimedia will 
form an important part of 
our future business.” says 
Romaic Bausch, SES’s direc- 
tor-general. 

SES has formed the Astra- 
Net service, in which share- 
holders include Intel, Deut- 
sche Telekom and Hughes 
Network Systems. 

Using a platform known as 
the European Satellite Multi- 
media (ESM) service, Astra- 
Net delivers data to suitably 
equipped PCs at high speed- 

Astra-Net PC cards sell for 
about $250 (£150) each, 
although this is expected to 
foil to about $150 by the end 
of the year. 

SES also plans to offer sat- 
ellite data services to large 


and small businesses, the 
public sector and consumers 
from two new satellites. 
Astra 1H (launched later this 
year) and IK, due to be 
launched in 2000. 

Canal Plus, the French 
pay-TV company, has 
t eam ed up with Cegetel, 
America O nline and Bertels- 
mann and plans to launch a 
fast internet service In 
France this autumn. 

The service will deliver 
internet content to PCs from 
satellite at speeds that are at 
least 10-15 times foster than 
standard telephone modems. 

Satellites may even deliver 
data and internet content to 
airline passengers, says 
Veronlque Blanc, a product 
manager at SITA. an air 
transport telecommunica- 
tions company. 

Ms Blanc notes that pas- 
sengers can already access 
telephone and fax services 
while In the air. thanks to 
satellite systems. 

Modem connections ini- 
tially offering air passengers 
e-mail facilities should be 
available this year, she says, 
with faster connections 
offering internet surfing 
coming in around 2000. 



NEIL BUCKLEY 

FILE FROM BRUSSELS 


Time to stop making allowances 


The allocation of MEPs’ travel costs has become a Europe-wide controversy. If it is 
not resolved soon, it may alienate ordinary citizens from the whole EU concept 


The departure of the 
monthly Brussels to 
Strasbourg parliament 
express is something to 
behold. The platform at 
Brussels Leopold station - 
located these days in the 
basement of the European 
Parliament's $lbn 
headquarters - teems with 
Eurocrats armed with 
overnight bags. Metal trunks 
filled with documents are 
heaved on to the train for 
the five-hour trundle south. 
The scene smacks of a new 
term at boarding school 

The mass transit by rail of 
Brussels-based support staff 
and assistants is only part of 
the monthly ritual 
Parliament members 
converge on Strasbourg from 
constituencies in all corners 
of the European Union, from 
Aberdeen to Athens. 

But the generous 
allowances MEPs get to pay 
their travel costs Is at the 
centre of a controversy that 


threatens to cloud the 
Europe-wide elections which 
members face next June. 
Unless they tackle the 
problem soon, some MEPs 
fear it could further increase 
voters’ apathy towards the 
one European Institution 
they directly elect 
Pressure for change is 
mounting. At June's Cardiff 
summit, parliament's 
president the affable 
polyglot Jose-Maria 
GU-Robles. got an unusual 
verbal mauling from EU 
beads of government who 
accused parliament's 
gravy-train image or 
alienating ordinary citizens 
from the whole EU concept 
The ElTs spending 
watchdog, the Court of 
Auditors, last month 
released a stinging report 
warning that parliament's 
allowances system was wide 
open to abuse. 

But such are the divisions 
caused by this apparently 


CONTRACTS & TENDERS 


REPUBLIC OF COTE DTVOERE 
PRIVATISATION COMMITTEE 
CITIBANK ItA. ABIDJAN (COTE D'IVOIRE) 

privatisation of the national air carrier 



AIR IVOIRE 

International tender 

In (be f ram e g ak of its program for sestracraring and privatising patdK 
comprise*. Ibc Cw w— of Republic of COtn d'Ivoire ties decided n privatise 
Vs national sir carrier. AIR IVOIRE. 

CITIBANK NA Abidjan iCflte d'lrotrc) will be the advisor » Ihe 
Privatisation Cottuoittoe tbr ifcii mimnwn 

An inaenonMai leader a being bamebed to select prime mveuora. 
taring excellent technical expertise in the air transportation area and sound 
financial tackgraond. to aequbv a majority stake ef 51 ft of the ram pony’s 
tqcdty. Ptrticipttioc CCTxSsona are spelled ogi in the informariuo merrioriiiiliiiii 

Following die partial liberahsatKM oT the traffic right* In ibe An Afnqnc 
me m be r stales xaoe III countries inf lad lug : Benia. Bndeina Fa»o. Glad. Central 
Africa Rcpobbc, CAce d'Ivoire. Mah. Manntanu. Niger, Republic of Congo. 
Senegal. Togo). AIR IVOIRE will play a major rale as a regtooal carrier on die 
Atatyn hob, and be gnated eKfenive domestic righn twer maxa nniao cliles. 
The company win aba continue to fly to Guinea. Liberia and Ghana. 

Potential investors can obtain as English or French infornuttno 
memorandum on tins privatisation nmacnrai along with a complete package of 
l e nder dik m u r utk by contacting : 


CITIBANK NA. ABIDJAN. 

Mr Charles KIE, Vice President - Corporate Finance 
28, lmmeuble Bob-can Roussel 
01 BP 3698 Abifijan 01 - CSte d’Ivoire 
Telephone : (225) 20 90 00 / 20 90 76 • Fax t <2251 21 16 87 


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Bids should be receiyed by no later duo Tharsdsqt, November 5. IJW m 
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PRIVATISATION COMMITTEE 

6, Boulevard dc JlnddniC • THeplttaa i (2251 23 2231 - 22 22 32-22Z236 
j Fix : (225) 23 S 35 

I Bids wm be pAfidy opened on the mmc iby. Dranday November J. 

ISM at 1240 un GMT at ihe prtvamatrao Owamtiee's offices tat above i 


mundane issue that 
parliament’s political leaders 
last week balked at adopting 
either of two competing 
plans to change the system. 
They did what parliament 
does best: set up another 
working party to examine 
the question further. 

“What kind of a message 
does this send?" sighs Alan 
Donnelly, leader of British 
Labour parliament members. 
-It’s taken us longer to sort 
out MEPs' expenses than it 
did to adopt all the 
legislation to cope with 
German reunification.” 

At the heart of the row is 
the system of paying lump 
sums based on the distances 
between MEPs' 
constituencies to parliament 
meetings in Brussels and 
Strasbourg. Instead of 
reimbursing actual costs. 

The Court of Auditors 
found MEPs' travel bill in 
1996 was a massive Ecu27.6m 
(£18m) - 30 per cent more 
than if members bad flown 
every single journey 
business class. Yet many 
MEPs travel by train, car or 
economy flights to 
parliament; some even get 
reduced fares on their 
national transport systems. 

Travel allowances 
averaged Ecu75,597 (£50,000) 
per MEP, a third of the 
Ecu227305 total expenses 


each received on top of their 
salaries. 

But why can MEPs not 
just accept reimbursement of 
their actual costs? The 
answer is that travel 
allowances are stretched to 
cover needs they were never 
designed for. ironing out 
deep-rooted inconsistencies 
in the way the embryonic 
Europe-wide parliament 
operates. Some members 
from southern states 
privately admit that profits 

mqrto from mani p ulating ' 

travel costs help supplement 
their meagre pay. 

The fact is that, to avoid 
jealous spats If MPs In 
London or Lisbon found 
their MEP compatriots 
earning more than they did, 
European parliamentarians 
earn the same as members of 
their respective national 
assemblies, and are paid 
from national, not EU, 
budgets. 

The result is huge pay 
disparities between MEPs 
from different countries, 
doing exactly the same job. 
The Greeks and Spanish, the 
lowest-paid, earn lees than a 
third of the Italians, the top 
earners. At the same time, 
the poorest paid MEPS are 
often from the farthest-flung 
countries, and benefit the 
most from distance-based 
travel payments. Some MEPs 


also use surpluses from their 
home-to-Brussels allowances 
to make up for inadequacies 
in the payments designed to 
cover travel costs around 
their constituencies. Spanish 
members, elected by 
proportional representation 
from national lists, say their 
constituencies are effectively 
the whole of Spain, making 
touring round to woo their 
voters a costly business. 

Parliament wants to tackle 
the travel allowances 
problem by adopting a 
statute that would regularise 
all aspects of MEPs' 
conditions - including 
pensions, social security, 
expenses for constituency 
travel - and set a common 
salary, paid from EU funds. 

But that needs the backing 
of EU heads of government 
While states such as 
Portugal the Netherlands, 
Spain and Sweden have 
indicated they might be in 
favour, others, such as the 
UK and Germany, mindful of 
the potential sensitivities 
with national parliaments, 
are reluctant 

Some MEPs say that 
unless EU states are 
prepared to grant them a 
proper status, they are 
disinclined to tackle the 
allowances problem. 

Euro-parliamentarians 
tend anyway to be somewhat 
bolshie about demands to 
put their house in order 
from EU heads of 


government - whom they 
blame for forcing parliament 
to continue to meet for 
historic reasons, in both 
Strasbourg and Brussels. 
Some suggest this 
peripatetic existence does 
more to damage parliament's 
proper functioning - and 
credibility - than petty rows 
about travel costs. 

Attempts to reduce the 
number of week-long 
Strasbourg sessions, fixed by 
the Maastricht Treaty at 12 a 
year, always meet furious 
French opposition. 
Suggestions of such a move 
are seen by the French, who 
are desperate to hang on to 
the only EU institution on 
their soil, as the thin end of 
the wedge. 

With no parliament 
sessions in August, when the 
whole EU virtually shuts 
down, the assembly must 
hold two sessions in 
Strasbourg next month 
to meet its yearly 
quota. 

That gives MEPs two more 
chances to tackle the 
allowances system before 
their president next 
confronts heads of 
government at an informal 
summit in Austria on 
October 24. But the real 
concern iS they continue to 
duck the issue is not any 
ticking-off Mr Gil-Robles 
might face from EU leaders. 

It is the way voters might 
react next June. 


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FINANCIAL TIMES 


MONDAY SEPTEMBER 21 1998 ★ 


15 


I 


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4 



THE ARTS 



BOSTON 

The.museixn world's mania tor 
Monet continues with an 
wtfteft bn.of oyer 90 works 
pafntBd by toe artist to foe list 
decade? of Ns fife. It opened 
jwstarday at Beaton's Museum 
erf Rne Ads and transfers to the 

Royal Academy of Ats in London 
m January. 

rev york 

The Metropolitan Museum's 
extensive collection of earty - 
Netherlandish paintings is- . 
showcased tomorrow in an 
exMWtion of L40 wart® by Jan 
van Eyck, Hans Memiing, Pieter' 
Bruegel foe ecfer'andothera. - 
On Friday, the Morgan Library 
unvefls -Master' Drawings from 
the Hermitage and Pushkin 
Museums", many of them never 
shown outside Russia. 


LONDON 

The, cfis&igtiishfid German 
condiatorKiitSaixiarlBQg 
(below) presides oyer the ' 
opentog concerts qf foe. 



Philharmonia Orchestra's new 
seasm tomorrow and on 

Saturday at the Royal Festival 

Had. The programmes feature 
works by Brahms end 
Shostakovich. 

Attar two weeks of previews, 


the press ere invited to see Tha ' 
-SAjefioomat the Donmar ■ 
Warehouse tomorrow nlghL 
Freely adapted by David Hare 
from Arthur Schnltdw's La 
Roods, the pfay stars Australian - 
film star Nicole Kidman alongside 
British actor tain Glen, the 
director is Sam Mandes. 

Terry Johnson directs the 
world premiere of his own new 
play, which opens at toe 
Lyttelton Theatre tonight Based 
on the Carry On films, Cteo, 
Gampbg. BnmanueOe and Dick 
stare Samantha Spiro and 
Geoffrey Hutchings (right). 

TORONTO 

The Canadian' Opera Company's 
1998-9 season opens at toe 
Hummingbird Centre with Norma 
on Thursday and 7osca on 
Friday. Marina Meschertatova 



sings the Ode rote in the Beflini 
and Sylvie Valayre in the Puccini. 

BERLIN 

The Deutsche Oper is laying 

special emphasis this season on 
the stage woks of Richard 
Strauss, to recognition of toe 
50th anniversary of his death 
next year. The first new 


production is Die Frau ohne 
Schatten, opening on Saturday 

and conducted by Christian 
Thielemann. 

BRNO 

The music of JanJfcek, who spent 
a large part of his Me to this 
Moravian city, is the centred 
thread of this yew’s Brno music 
festival, opening cm Thursday. 
There will be performances of 
most of his orchestral and 
chamber works, and a staging ot 
From the House of the Dead. 

PARIS 

In Paris this week, the Cuban 
National Ballet opens a season at 

the Theatre des Champs BysAes, 
directed by the grand and 
splendid Alicia Akmso. The visit 
is pan of the company's fiftieth 

anniversary celebrations. 


ZORICH 

An exhtoition entitled "Max 
Beckmann and Paris”, opening 
at the Kunsthaus on Friday, 
brings together more than 100 


masterpieces of modem art 
Beckmann's paintings (below) 
ere set alongside works by 
Matisse, Picasso. Braque, Leper 
and Rouault. 



t 


I 


1.1 

v 




Opera’s 

persuasive 


voice 

Ruth Mackenzie has a 
way with words, and 
Scotland will benefit, 
says Andrew Clark 

When Ruth Mackenzie was chief 
executive of the Nottingham 
Playhouse, she inherited a 
Christmas tradition whereby 
each member of staff would pick 
the name of a colleague out of a 
hat and buy a small gift anony- 
mously. An actor dressed as 
Father Christmas would then dis- 
tribute the presents over drinks. 
“One year I got a very nice lava- 
tory brush." Mackenzie recalls, 
"and the message was ‘For Ruth, 
who has to clean up aH the dirt'." 

No such tradition exists at 
Scottish Opera, where Mackenzie 
became general director a year 
ago. but she reckons it is a fair 
analogy of her job. Her mantra, 
which she picked up on one of 
the management courses she now 
teaches, is "only do what only 
you can do". She interprets it as 
Taking the rap if all goes wrong. 
The fact that I am the person 
with ultimate responsibility 
doesn't mean I do it alL It's my 
job to try to help everyone else 
do what they can do. Opera is 
about teamwork, so If you intro- 
duce a new person to the team, it 
would be a failure on my part if 
people suddenly said ‘Yes, that’s 
Ruth Mackenzie'." 

At 41. Mackenzie is rapidly 
emerging as one of the most visi- 
ble members of the UK arts 
establishment. Her early work 
with the Arts bound! and South 
Bank Centre marked her out as a 
high-flyer, and she seems des- 
tined. after a suitable stint in 
Scotland, for one of the big, 
thorny metropolitan jobs. She is 
on everyone's list of achievers, 
including Tony Blair’s: she was 
among the leading arts figures 
invited to a seminar with the UK 
prime minister at 10 Downing 
Street earlier this year. “But 
being accepted by the establish- 
ment hasn’t compromised her 
vision," says a former associate. 
“She is an excellent case of how 
to make creative use of inside 
tracking. " 

When you meet Mackenzie, you 
quickly realise why she has 
climbed so fast up the career lad- 
der without making enemies. Her 
knowledge of opera may be thin, 
but she has a first-class mind and 
does not flaunt it She is sociable 
and sassy, with no airs and 


graces, and seems happiest in the 
artists' bar or chatting to staff 
oyer a cigarette on the step out- 
side Scottish Opera's Glasgow 
headquarters. Mackenzie smokes 
40 a day, a symptom of her high 
adrenalin and workaholic life- 
style. 

None of this explains her 
impact on the public conscious- 
ness during seven years in Not- 
tingham and 12 months north of 
the border. One of the keys to her 
succ e s s is an ability to articulate 
the needs and concerns of the 
arts world in a way that enthuses 
the world of money and politics; 
another is the fact that she seems 
to have no personal axe to grind. 
If she is ambitious, she pursues 
her goals in the nicest possible 
way and for the best possible rea- 
sons. There is something of the 
arts junkie in her - her only 
agenda is “to make better art and 
serve communities". 

You won't find Mackenzie voic- 
ing the usual pieties about widen- 
ing the audience base. She is gen- 
uinely enthusiastic about filling 
the theatre with young people 
without throwing artistic criteria 
out of the window. London-born 
and Cambridge-educated, she has 
a gift for languages, a deep know- 
ledge of visual art and a Euro- 
pean vision - adding up to a 
broad-mindedness unusual 
among her peers. In short, she is 
the persuasive voice of the arts. 

This does not prevent her 
sprinkling her conversation with 
management-speak. “Empower- 
ment" and “brainstorming" are 
favourite words which character- 
ise her consensual style. At Scot- 
tish Opera, that style has yet to 
be thoroughly tested. 

She inherited an organisation 
which, largely thanks to her pre- 
decessor, Richard Jarman, had 
found a measure of stability after 
years of endemic crisis. Audience 
surveys suggest it attracts the 
broadest social and age range of 
all UK companies. With ticket 
prices from £L50 to £40, it faces 
none of the political problems 
associated with opera in London. 
Thanks to its small touring sub- 
sidiary. Scottish Opera is seen as 
genuinely national Artistic stan- 
dards remain high, as this 
month's Edinburgh festival pro- 
duction of Dalibor testified. 

Shortly after her appointment, 
however, Mackenzie discovered 
that a proposed orchestral 
merger with Scottish Ballet - 
part of a three-year financial sta- 



Ruth Mackenzie: 'She b an excellent case of how to make creative use of inside tracking’ 


bilisation programme agreed 
with the Scottish Office - had 
fallen apart With an increase in 
subsidy hanging on the two com- 
panies* ability to carry out 
savings, it has fallen to her to 
find other ways of combining 
operations, such as by pooling 
management resources. Whether 
this is in the interests of either 
company remains an open ques- 
tion. The proposal has bred fur- 
ther uncertainty, and will test 
Mackenzie's ability to knock 
heads together. 

Where she has made identifi- 
able progress is in creating a 
sense of partnership with Scot- 
land's local authorities, many of 
which have been reluctant to 
contribute to an organisation 
catering mainly for the big popu- 
lation centres. Drawing on her 
experience of community arts in 
England, Mackenzie has made a 
point of visiting council offices to 
ask bow Scottish Opera can con- 
tribute. Her campaign is based on 
the rationale that only by creat- 


ing the broadest sense of public 
ownership can you develop and 
sustain the political base neces- 
sary to fund an art form as 
expensive as opera. 

She makes her pitch in terms 
of “visions" and “dreams", but 
the bottom line is practical. 
"There are 5m people in Scot- 
land, and they all help to pay for 
us. How do we do a good job for 
them? You don't start by saying 
T need more money 1 . You work 
out what your vision is, explore 
how it is going to meet Scotland's 
needs and show how you can 
help. Only then are you able to 
say ‘We need some more money*. 
You do it in partnership, so that 
everyone sees they have a stake 
in developing this. If the vision is 
good enough and it sounds like 
it’s going to work, that's the diffi- 
cult bit After that, getting the 
money isn't so hard.” 

But isn’t all this peripheral to 
the company’s core function of 
presenting top-quality perfor- 
mances in theatres suited to the 


purpose? Mackenzie disputes any 
suggestion that her community- 
based vision is politically fash- 
ionable. 

M Our aim is to ensure that the 
highest quality of music theatre 
is part of the vocabulary of every- 
one in Scotland, and to recognise 
that not everyone has equal geo- 
graphic access. I'm not pretend- 
ing you can do Dalibor to festival 
standard in the town hall in Ler- 
wick, any more than you can 
have a heart transplant unit in 
every community. But you also 
have to recognise that the 
essence of making and discover- 
ing and understanding opera can 
be shared and used by communi- 
ties in many different ways. Find- 
ing out how to do that is our 
most important job." 

Scottish Opera's Glasgow season 
opens on Wednesday at the Theatre 
Royal with The Magic Rute*. Its 
production of The Makropoufas 
Case' is on tour In the High lands 
and Islands until October 24. 


INTERNATIONAL 

Arts 

Guide 


AMSTERDAM 

DANCE 

Hot Muaektheater 
Tel: 31-20-551 8911 
Nedertands Dans Theater I; triple 
bill comprising Sinfbnietta by Jiff 
Kyton. Grass by Mats Ek, and 
Start to finish by Paul Lightfoat; 
Sep 25. 26 


BIRMINGHAM 

CONCERT 

Symphony Hall 

Tel: 44-121-212 3333 

City of Birmingham Symphony 

Orchestra: conducted by Sakari 

Orarno to wort® by Sibefius, 

Dutilleux and Mahler; Sep 24 


BOSTON 

exhibition 

Museum of Fine Arts 

Tel: 1-617-2679300 
Monet In the 20th Century: more 
than 80 works painted by the 
artist in the last decades of his 
We. Beginning with paintings of 
the garden at Gtvemy, the show 
concludes with five of the 
monumental waterifly paintings 


that Monet called Grandes 
Decorations; to Dec 27 


CHICAGO 

EXHIBITION 
Art Institute Of Chicago 
Tel: 1-312-443 3600 
wwwArtic.edu 
Julia Margaret Cameron's 
Women: 60 vintage prints of 
Victorian subjects such as Julia 
Jackson, mother of Virginia 
Woolf, and Alice Liddell; to 
Jan 10 


COPENHAGEN 

EXHIBITION 

Louisiana Museum of Modern 
Art, Humlebaefc 
Tel: 45-4919 0719 
www.louislana.dk 
Joan Mir6: big retrospective 
comprising 140 paintings, 
drawings and sculptures, 
including works borrowed from 
the artist's family since the 
exhibition was shown in 
Stockholm over the summer, to 
Jan 10 


GLASGOW 

OPERA 
Theatre Royal 

Tel: 44-141-332 9000 
The Magic Flute: by Mozart. 
Scottish Opera production by 
Martin Duncan, conducted by 
Richard Fames; Sap 23, 26 


LONDON 
CONCERTS 
Barbican Hall 
Teh 44-171-638 8891 


London Symphony Orchestra: Sir 
Colin Davis conducts works by 
Mozart and Bruckner in the 
opening concert of the autumn 
season. With piano soloist Radu 
Lupu; Sep 23, 24 

Royal Festival Hall 
Tel: 44-171-960 4242 
Philharmonia Orchestra: 
conducted by Kurt Sanderflng in 
works by Brahms. Beethoven 
and Shostakovich. With piano 
soloist Andr&s Schiff; Sep 22, 26 

EXHIBITION 
Royal Academy of Arts 
Tel: 44-171-300 8000 
Picasso: Sculptor and Painter in 
Clay. T7WS first big exhibition of 
Picasso's ceramics includes 
about 100 pieces, many of which 
have never been exhibited. They 
wifi be shown with some 
paintings and sculptures, 
demonstrating how Picasso 
developed his ideas across 
different media; to Jan 1 

OPERA . 

Eng fish National Opera, 

London Cofiseum 

Tel: 44-771-632 8300 
Oteflo: by Verdi. New production 
by David Freeman, designed by 
Tom Phillips and conducted by 
Paul Daniel/Mark Shanahan. 

David Rendafi sings the title rote; 
Sep 22, 25 


LOS ANGELES 

OPERA 

L. A. Opera, Dorothy Chandler 
Pavifiton 

Tel: 1-213-972 8001 
www.taoperaL.otg 


• Carmen: by Bizet Washington 
Opera production by 
Ann-Margnst Pettersson, 
designed by Lennart Mork. The 
conductor Is Bertrand de Billy 
and the title role is sung by 
Jennifer Larmore; Sep 22, 25 

• Werther by Massenet 
Conducted by Emmanuel Joel in 
a co-production with Theatre du 
Capitols Toulouse staged by 
Nicolas Joel. The title role is 
sung by Ramdn Vargas; 

Sep 23, 26 


MADRID 

EXHIBITION 

Museo National Centro de Arte 
Refria Sofia 
Tel: 34-1-467 5062 
Federico Garda Lorca 
(1898-1936): centenary 
celebration of the Spanish poet 
Indudes biographical material 
and examples of the different 
forms in which he worked with 
friends and collaborators 
including Falla, Dali and Bunuel; 
to Sep 21 


MANCHESTER 

CONCERTS 
Bridgewater Hall 
Tel: 44-161-907 9000 
BBC PhUharmonic: conducted by 
Sir Charles Mackerras in a 
programme of works by 
Beethoven. With soloists 
including bass WiHard White; 

Sep 26 


MUNICH 

CONCERTS 
Philharmonic Gasteig 


Tel: 49-89-5481 8181 

• Kremerata Musica: conducted 
by Gidon Kremer in Piazzoila's 
Maria de Buenos Aires; Sep 24 

• Munich Philharmonic 
Orchestra: conducted by Heinrich 
Schiff in works by Beethoven, 
Hindemith and Mahler; 

Sep 21, 22 


NEW YORK 

CONCERTS 

Avery Fisher HaU, Lincoln 
Center 

Tel: 1-212-875 5030 
www. lincolncenter. org 
New York Philharmonic: Kurt 
Masur conducts Beethoven - 
The Complete Symphonic Cycle. 
Programme II (Sep 22Y, 
Programme ill (Sep 24, 25); 
Programme IV (Sep 26) 

OPERA 

New York City Opera, New 
York State Theater 
Tel: 1-212-870 5570 
www.nycopera.com 

• II Barbiere di Siviglia: by 
Rossini. Directed by Albert 
Sherman and conducted by 
Guido Ajmone-Marsan. Cast 
includes Kristine Jepson, Daniel 
Mobbs and Matthew Polenzani; 
Sep 24 

• Partenope; by Handel. 

Directed by Francisco Negrtn and 
conducted by George Manahan. 
Lisa Saffer sings the title role; 
Sep 22, 26 


PARIS 

DANCE 

Theatre des Champs BySees 
Tel: 33-1-4952 5050 




Charming date 
with Henry VIII 


THEATRE 

ALASTA1R MACAULAY 

Katherine HawanJ 
Rochester Festival Theatre 

Historical fiction about famous 
people allows us to screen our 
ignorance and curiosity ivtth fan- 
tasy and arrant projection. Just 
what went on between Marilyn 
and Jack Kennedy? What did 
Philip 11 of Spain think about his 
son Carlos and about the Spanish 
Inquisition? The answers to these 
questions have less to do with 
historical fact than with the 
workings of our minds. And usu- 
ally - not always - historical fic- 
tion is something neat, cosy, 
reassuring: something that plugs 
the gaps in our knowledge with a 
notion with which we like living. 

Take, for example. Katherine 
Howard, the new play by William 
Nicholson that wraps up this 
year's Chichester Festival sum- 
mer season. It has bags of charm, 
of course. Nothing less is to be 
expected from the author of Sha- 
daw lands, on whose tender 
C.S. Lewis shoulder so many of 
us wept buckets. 

Here, the most charming idea 
of all is the nicely surprising con- 
ceit that Katherine Howard, fifth 
wife to Henry VIH. was neither 
an adulteress nor a liar but a 
loyal truth-speaker who learnt to 
love her fiat, smelly old husband. 
Nicholson is so reasonable and so 
clever and so consoling that he 
even makes us understand why 
Henry VIH still has her beheaded. 
It is an simply darling. 

We know who is good and who 
is bad. (That is what fiction 
means.) In this case. Archbishop 
Cranmer gets to play the puni- 
tive partisan sleuth Ken Starr 
role, and posy treacherous Lady 
Jane Rochford gets to play Linda 
Tripp. We are meant to like nei- 
ther of them; and just as bad is 
the weathervane leading courtier 
Duke of Norfolk. 

Most of the leading characters 
get their share of flamboyant 
quotable lines. Some are meant 
to be ironic and Wildean. Lady 
Jane: “Men are all the same. 
TCiey only want one thing. An 
advantageous marriage.” Duke of 
Norfolk (to Katherine Howard, his 
niece y. “Your marriage is none of 
your business.” 

But mainly Nicholson has - 
like hundreds of Tudor/Jacobean 
historical fiction- writers before 
him - Shakespeare on his mind. 
Although Katherine Howard 
gives the play its name, it is her 
husband who is the play’s hero. 
Only to Henry vm does Nichol- 
son accord soliloquies. 

Unfortunately, this is not 
enough for Nicholson: he must 


make Henry Vlll compare him- 
self to God, again and again. He 
does so in jest: if the mothur of 
God could enjoy an immaculate 
conception, then why not ugly 
Anne of Cleves? He does so in 
earnest: "This is what God must 
feel like.” Soon be projects on to 
God all his own loneliness and 
need for love; then he projects on 
to God all his own sense of 
betrayal and pain. One feels 
sorry for God. who is likened to a 
five-times-married. faith-adjust- 
ing monarch who hates his own 
body and never once mentions 
his children. 

Still, oodles of charm prolifer- 
ate. It is all so sweet - to be 
asked to believe that one of the 
more famous adulteresses of 
English history was in fact a 
faithful wife and that Henry VIII 
was in love with her and only 
consented to her execution 
because he could not bear to 
share even her heart. And then 
to watch the Duke of Norfolk lip- 
smaddngiy torturing Katherine's 

Although Katherine 
Howard gives the 
play its name, it 
is her husband who 
is the play’s hero 


poor former lover Thomas Cul- 
pepper and Cranmer’s creepy 
voltes face between good cop and 
bad cop! 

In Robin Lefevre's staging, 
most of the performances are to 
match. One can believe Richard 
Griffiths when his Henry VIH 
says: “I hate my body"; his entire 
demeanour now expresses acute 
discomfort He is no autocrat, but 
he catches the self-deprecation 
and pretty little philosophisings 
of this monarch well enough. 
Emilia Fox is a little too prune- 
faced as Katherine, but her voice 
and poise make a handsome 
impression. 1 am sad to see 
Julian Rhind-Tutt, a young actor 
who made so brilliant an impres- 
sion at the National Theatre two 
years ago. fumbling his way 
through the role of Culpepper. 

Jonathan Coy enjoys Cran- 
mer’s rapid changes of tone, and 
Frances Tomelty and Denis Qull- 
ley turn on the best kind of Chi- 
chester hollowness as Lady Jane 
and Norfolk - all burnished sur- 
face and actorly relish for easy 
effects. But who can blame them? 
There is something truly vulgar 
about this kind of how- th e-great- 
really-lived -and-loved historical 
fiction. Nicholson’s soul is purest 
Georgette Heyer. 


• Cuban National Ballet Swan 
Lake, in a staging by Alicia 
Alonso; Sep 22, 25, 26 

• Cuban National Ballet Giselle, 
in a staging by Alicia Alonso; Sep 
23,24 

EXHIBITIONS 
Mus4e d’Orsay 
Tel: 33-1-4049 4814 

WWW. Musee-Orsay. fr 

Millet/Van Gogh: display of 85 
works brought together to 
demonstrate the influence of 
Millet on the work of Van Gogh. 
These include paintings, 
drawings and pastels by both 
artists, many of them on loan 
from the Van Gogh Museum in 
Amsterdam; to Jan 3 

Musee du Louvre 
Tel: 33-1-4020 5151 
www.touvre.fr 

• Astronomy and Astrology in 
the Islamic World: display of 
instruments developed by Arab 
astronomers between the 8th 
and 15th centuries, shown 
alongside a selection of everyday 
and religious objects decorated 
with astrological designs; to 
Sep 21 

• Bassano and His Sons: works 
by the Venetian painter Jacopo 
Bassano (1510-1592) and his 
sons. The display brings together 
works owned by the Louvre with 
loans from other French 
museums; to Sep 21 


SAN FRANCISCO 

OPERA 

San Francisco Opera, War 
Memorial Opera House 
Td: 1-415-864 3330 


www.sfopera.com 
A Streetcar Named Desire: world 
premiere of a new opera by 
Andre Previn, with a libretto by 
Philip Lifted based on Tennessee 
Williams’ play. The staging is by 
Colin Graham. Andre Previn 
conducts and the cast stars 
Renee Fleming; Sep 23, 26 


TOKYO 

CONCERT 

Suntory Hall 

Td: 81-3-3584 9999 

Japan Virtuoso Symphony 

Orchestra: conducted by Philippe 

Entremont in works by Berfloz 

and Beethoven; Sep 21 


TV AND RADIO 

• WORLD SERVICE 
BBC World Service radio for 
Europe can be received in 
western Europe on medium wave 
648 kHZ (463m) 

EUROPEAN CABLE AND 
SATELLITE BUSINESS TV 

• CNN International 
Monday to Friday, GMT: 

D6-30: Moneyiine with Lou Dobbs 
13^0: Business Asia 
19.30: World Business Today 
22.00: Work! Business Today 
Upd ate 

• Business/Market Reports: 
05:07; 06:07; 07:07; 08:20; 09:20; 
1020; 11:20; 11:32; 1220; 13:20; 
14:20. 

At 08:20 Tanya Beckett of FTTV 
reports live from LiFFE as the 
London market opens. 





A Ii 
dissidr 
today 
Hanoi 
his w 
spend 
in Vi. 
peace! 

The 
Hoat. 
and a 
56-ye; 
arum 
a gen 
more 


FINANCIAL TIMES MONDAY SEPTEMBER 21 199S 


COMMENT & ANALYSIS 



PHILIP STEPHENS 


Third way ahead 

Bill Clinton, Tony Blair. Romano Prodi and others are looking for 
ways to add intellectual nourishment to centre left politics 


Politics needs a narrative. 
Today's political leaders are 
drawn from the managerial 
classes. The prophets and 
philosophers have made way 
for lawyers and management 
consultants. They cannot 
change the world, they 
shrug. The best they can do 
is help us to survive in it. In 
this era of global markets, 
we must set them modest 
performance targets. 

And yet . . . These same 
leaders are discomfited by 
the admission. They know 
that without ideas and 
inspiration, politics cannot 
conceal its hollowness. 
Pragmatism must make 
some connection with 
principle. 

Here we find the 
explanation for the efforts of 
Bill Clinton. Tony Blair. 
Romano Prodi and others to 
add intellectual nourishment 
to the politics of the centre 
left Progessive politicians, 
as they call themselves, have 
returned to power across the 
west. 

A victory for Gerhard 
Schroder over Helmut Kohl 
in this month's German 
elections would draw a final 
symbolic line under what, 
not so long ago. seemed a 
permanent hegemony of the 
right. But the centre left 
needs a theory to underpin 
the practice of government 

Thus far these new leaders 
have prospered from their 
determination to dump the 
old ideologies of the left 
What counts is what works, 
they tell us. Without shame, 
they will borrow policies 
from left and right. If need 
be, they will split the 
difference between Marx and 
Hayek. Dick Morris, the 
disgraced former pollster for 
the now disgraced US 
president, coined the phrase 
triangulation: a marriage of 
the generosity of liberalism 
with the realism of 
conservatism. Mr Clinton 
and Mr Blair prefer to 


call it the Third Way. 

We cannot fault the 
political strategy. The left 
had to rebrand itself or die. 
The middle classes needed 
reassurance that it had 
abandoned its love affair 
with big government. 
Campaigns need slogans. 
And a promise to civilise the 
marketplace rather than 
dismantle It answers the 
contradictory impulses of 
the age. We don't want 
governments to substitute 
themselves for Adam 
Smith's invisible 
hand. They can sometimes 
steer it in a friendlier 
direction. 

There is another break 
with the past. The left used 
to define Itself by its 
commitment to equality of 
outcomes. The aspiration 
always owed more to 
romance than reality, but it 
provided an ideological 
anchor nonetheless. In place 
of equality Messrs Clinton 
and Blair promise social 
mobility. 

All this tells us what the 
Third Way isn't. As Mr Blair 
remarks in a new tract 
published to coincide with 
today's Third Way seminar 
with Mr Clinton and Mr 
Prodi in New York, it is 
neither the statism of the 
Old Left nor the 
neo-liberalism of the New 
Right. It Is not the size of the 
state that matters, but its 
leverage. To Mr Blair's mind, 
small (or let's say 
medium-sized) government 
can also be strong 
government. 

Beyond that it is easy to 
become lost There is 
nothing new in the ambition 
of remaking the path 
between market liberalism 
and social justice. During 
the cold war years, Sweden 
called it the Middle Way. 

The subsequent seismic shift 
in the political landscape 
during the 1980s stranded 
this model on the left. 


Something similar has been 
happening to the postwar 
social democratic 
settlements in France and, 
to a lesser extent, Germany. 
But thus far the 
Clinton-Blair Third Way has 
been more illuminating as a 
description of the dilemmas 
of centre-left governments 
than as a new political 
credo. 

To be fair, Mr Clinton has 
shown bow the means of the 
right can occasionally be 
harnessed to the ends of the 
left. The earned income tax 
credit has delivered higher 
Incomes to the working poor 
while winning the approval 
of middle America. Tax 
credits for education 
have served the same 
purpose. 

Mr Clinton is more than a 
caring conservative. How 
else can one explain the rock 
solid support for the 
president from 
African-Americans as the 
Monica Lewinsky scandal 
takes its remorselessly futile 
course? 

Mr Blair has his own 
examples. For all his 
government's over-zealous 
commitment to the economic 
orthodoxy of the times, there 
has been a fair amount of 
redistribution by stealth. Its 
welfare-to-work 
programmes, a new working 
families tax credit and 
substantial increases in 
spending on health and 
education programmes defy 
the oft-cited continuity with 
Thatcherism. 

The confusion sets in 
when the Third Way label is 
applied indiscriminately as a 
post hoc justification for 
anything and everything. 
Thus some of Mr Blair's 
intellectual disciples will 
hold up the political 
settlement in Northern 
Ireland as an example of this 
new politics of the 
centre-left. We are asked to 
forget that the parameters of 


that accord were fairly 
precisely drawn by John 
Major’s Conservative 
government. 

Mr Clinton is apt to play 
the same trick. A welfare 
reform programme written 
by the Republicans is recast 
as a New Democrat flagship 
only after the president is 
obliged to sign it into law. 
Thus the Third Way 
becomes no more than an 
accommodation with 
political reality. An unkind 
observer might ask how long 
will it be before Mr Clinton's 
curious sexual tryst with Ms 
Lewinsky is described as the 
Third Way between fidelity 
and adultery. 

Some imprecision is 
inevitable. Reality never fits 
neatly with theory. 
Ultimately, governments 
define themselves by what 
they do rather than what 
they say. And Mr Blair, for 
one. sounds more convincing 
when he eschews some of 
the obscure jargon of the 
Third Way to speak in more 

familiar terms of 

modernising social 
democracy. Here 
government remains an 
essential instrument of 
progress.- But regulation 
replaces ownership. i 

What’s missing is an. i 
admission that the familiar 
lines between left and right 
- those between tax cuts and 
spending, income inequality 
and redistribution - cannot 
be dodged. There will always 
be a choice between tax cuts 
for the middle classes of 
Middle America and Middle 
England and increased 
spending to lever up the life 
chances of the poor. The 
Third Way does not tell us 
where the line will be 
drawn. Only that, somehow, 
it can satisfy both 
constituencies. 

There is though, a much 
bigger threat to this new 
politics of the centre-left. 

With cruel irony, the gospel 
of slim but effective 
government is being 
preached at just the moment 
when we see politics and 
politicians at their most 
ineffectual. 

The present gale blowing 
through the global financial 
system has shown them 
powerless. Markets, we are 
learning, are ruthless of the 
pretensions of our 
politicians. Where, I wonder, 
is the Third Way which 
leads us out of world 


LETTERS TO THE EDITOR 


■ ■ ■ V ■ V '’■& 


Criticism oyer high costs of share 

dealing is unfairly targeted 




Unpayable 

debts target 


From Mr Alex McClarty. ■ 

Sir, I refer to your report 
"Cheaper European share 
dealing move” (September 
14) about brokers' plans for 
reducing dealing costs on 
top 300 companies across 
Europe. British brokers are 
very cheeky in putting the 
blame for high dealing costs 
on their continental Euro- 
pean colleagues. 

The fact is that the cost of 
buying shares in the UK is 
much higher than here in 
Germany. I pay less than 0.5 


per cent in costs on deals of 
just over £1,000, whereas 
such deals can cost four 
times as much in the UK. 

The charges with my 
direct broker are on a sliding 
scale so that it becomes 
rapidly very cheap to buy 
and selL It makes sense to 
buy UK shares on the Ger- 
man bourse. 

Add to this the mucb 
narrower spreads in Ger- 
many. the electronic settle- 
ment within two days (com- 
pared to mostly cheque 


settlement after fivB;.dayr& 

the UK), a nominal’ DM5 -for ■ 
transfers between <hurexk$£ 
accounts at the mld»rate> 
and a nominal 0-1 per Cent- 
[or a nominee account "par. 
annum, and the fee-hungry . 
British brokerages look like 
they could be out of business 
soon if they don’t change 
their ways. 

Alex McClarty, 

Bansjakobstr. 101. 

81825 Munich, 

Germany 


Good reason not to teach technology 


From Mr Marais Davison. 

Sir, Baroness Blackstone, 
UK higher education minis- 
ter, says “an understanding 
of technology Is likely to be 
at least as important as spe- 
cialist knowledge which may 
be out of date within 
months'’ ("Minister attacks 
'elite* exam’', September 18). 

The fourth of my five chil- 
dren has just entered the 
sixth form to. study German, 
French, Italian and History. 
As I am unaware of any 
plans to exterminate the 
populations of Germany. 
France or Italy “within 
months”, can I take it that in 
my daughter’s case the min- 
ister Is referring to her 


boss’s strenuous efforts to 
rewrite the history book? 

More seriously. Baroness 
Blackstone is of course right 
that we should not teach 
children things which will 
rapidly become useless, 
because what they learn in 
their first 15 years or so gets 
tucked away in a precious 
part of the memory which 
does not fade. All the more 
reason not to teach them 
technology. 

Every’ August the press 
coverage of the GCSE results 
includes the inevitable item 
about the youngest person 
ever to gate, a GCSE pass. 
This year it was a six-year- 
old, but every year it is the 


same subject - IT. We need 
only to reflect briefly on 
what computers were like 
ten years ago to realise that 
much of what this poor child 
has learned will be obsolete 
by the time be or she 
reaches the normal age for 
sitting GCSE. And what will 
the child do then? Apply to i 
the exam board to have h is/ 
her 1998 pass in IT reclassif- 
ied as a distinction in indus- 
trial archaeology? 

Down with hexadecimals! 
Up with hexameters! 

Marcus Davison, 

77 Mildred Avenue. 

Watford WDl 7DU, 

UK 


Bundesbank more preoccupied with inflation than money stock 


From Mr Terry 
O'Shaughnessy. 

Sir, Wolfgang Mflnchau is 
right when he says that 
there is a battle over the 
European Central Bank's 
monetary strategy, but 
wrong about the Bundes- 
bank’s position (“Experts 
ponder monetary strategy". 
September 15). 

He says the Bundesbank is 
backing monetary targeting 
in part because it has 
worked in Germany. How- 
ever. the evidence (eg Ber- 
nanke and Mihov, European 


Economic Review, 1997) is 
that the Bundesbank takes 
less notice of monetary 
aggregates than Mr Mfln- 
chau supposes. 

The Bundesbank is 
unlikely to tighten policy In 
the face of unexpectedly 
rapid monetary growth if 
other indicators point to 
lower rather than higher 
inflation, hi other words, the 
Bundesbank really targets 
inflation, not the money 
stock. 

The battle, then, is 
between an explicit inflation 


target and an inflation target 
which must be deduced by 
estimating a central bank's 
“reaction function". 

The former approach has 
all the advantages: it is 
transparent, it makes sense 
to market participants and it 
targets something that mat- 
ters. Better still, if the target 
is externally set, it can serve 
to give central hankers 
proper incentives. 

And if the target is set by 
a democratically accountable 
body (as in the UK or New 
Zealand) it has some chance 


of maintaining public 
support. 

The alternative would be 
like company directors 
deciding on their own incen- 
tive scheme - in secret - 
based on a performance mea- 
sure which does not matter 
to anyone and which can. if 
necessary, be manipulated to 
make the board look good. 
Surely, this would not 
happen? 

Terry O’Shaughnessy, 

St Anne's College, 

Oxford, UK 


a I know its late, tut Icl like some 
susti. How far do I have togfo?” 


Number One Southwark Bridge, London SE1 9HL 

We sra keen 10 encourage tartars torn readers waridufcfe. Letters may be faxed to +J4 171-87.3 5838 pet ta* to “friel. e.maJt 
lettera.e>AanMxom Pubtetwd letters am also jvafetNe on the FT web srte, http^/www.FT.oarri Transfelwn may be avaiatto for 
Wters written tilha mail international languages. Fax 01 71 873 5938. Letters shoiM be typed and rex hand wrimart- 

ECONOMICS NOTEBOOK WOLFGANG IMUNCHAU 

A leadership in denial 

Europe's central bankers have no appetite for global power. So they will ignore the 
existence of a crisis in Asia, Russia or Latin America until it has some impact on them 



T he complacency of 
European central 
bankers in their 
response to the 
international financial crisis 
is breathtaking. “We do 
what we can do, but there is 
not much we can do.” These 
are the words of leadership 
offered by WIm Duisenberg, 
president of the European 
central bank. Speaking in 
The Hague over the week- 
end, he acknowledged that 
the crisis would have some 
effect, but said that Europe 
would remain “an oasis of 
, peace". 

Europe's political elites 
always saw in economic and 
monetary union a way to 
challenge America's global 
economic dominance, 
although they do not like to 
admit this in public. 

The trouble is that the 
central bankers in charge of 
running the single currency 
have no appetite for global 
leadership. They interpret 
their constitutional role as 
narrowly as possible in 
terms of euro-zone price sta- 








Looking on: Vfim Duisenberg M0 and Hans Tfotmeyer 


quences for Europe. The lat- 
est example is the Bundes- 
bank’s monthly report for 


bility. The consequence of September, which painted a 
this dichotomy is a black glowing picture of the Ger- 




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Room service menus abound wilt regional selections: from deep- disk pizza to striped kass J* 
prepared wit Lout unwanted calories, to Lome made ckicken soup at midnigLt. For 
tke same LreadtL of cLoice in anotker unequalled setting, visit our restaurants 

downstairs. Tke demands of L us in ess demand notking less. Pkone your travel FOUR SEASONS 
counsellor or, in tke U.K., OSOO-526-&4S. Visit our^ek site: itw.fourseasons.com anaf 

Ds/hung l!*t arl qfttrtitt of JO (with m Ip eounlrm 


hole of power without 
responsibility. 

We do not know exactly 
what Mr Duisenberg meant 
by his statement - let alone 
what it Is that he and his 
colleagues are actually doing 
to help - but the outside 
world will interpret his 
words as the equivalent of 
waving two fingers. 

Mr Duisenberg is not 
unique in this respect He is 
only blunter and perhaps 
politically less sensitive than 
other European central 
bankers. He just says what 
they think. 

Ask almost any of them, 
central banker or economy 
minister, and one finds they 
look at the crisis in Asia, 
Russia and Latin America 
purely in terms of the direct 
impact on Europe. 

As long as the domestic 
! econometric forecasting 
models do not start flashing 
any warnings, they will deny 
the existence of a crisis, let 
alone countenance a defla- 
tionary threat. In other 
words, it is a problem, but 
not theirs. 

This view is complacent 
both in terms of the diagno- 
sis of the problem and the 
potential economic conse- 


man economy. The report 
acknowledged that interna- 
tional events had had some 
effect on domestic economic 
growth, but said that this 
was more than compensated 
for by strong domestic 
demand and investment. All 
is well, according to the 
Bundesbank. 

The International Mone- 
tary Fund is far more cau- 
tious in its latest economic 
assessment of the German 
economy, published over the 
weekend. It acknowledged 
that Germany was on a 
cyclical upswing, but said 
the external risks remained 
formidable. 

There is, of course, no evi- 
dence to suggest that the 
international financial crisis 
will inevitably be deflation- 
ary. But the crisis does pose 
a systemic risk to the finan- 
cial system and a possible 
loss of investor confidence - 
risks which are difficult to 
quantify. 

So what do European cen- 
tral bankers think about the 
crisis itself? There is over- 
whelming agreement that 
the crisis is caused primarily 
by those who are suffering 
from it - a kind of divine 
justice. Europeans believe 


that it is caused by a combi- 
nation of structural deficien- 
cies In the affected countries 
- an undeveloped financial 
sector, crony capitalism, cor- 
ruption - and moral hazard, 
for which they blame the 
IMF. 

Moral hazard - the incen- 
tive to cheat in the absence 
of penalties - usually goes 
together with “adverse selec- 
tion”. the tendency of those 
who cheat to hide their iden- 
tity. 

In this particular case, 
moral hazard relates to 
Investors and banks piling 
into emerging markets 
knowing they will get bailed 
out by IMF-led assistance 
when things go wrong. 

Hans Tietmeyer, president 
of the Bundesbank, hardly 
misses an opportunity these 
days to warn about moral 
hazard and to call for 
economic reform in the 
affected regions as a neces- 
sary condition to a solution. 
He also repeatedly makes 
the point tbat monetary 
policy did not cause the cri- 
sis and will therefore not 
solve it either. 

An example of different 
responses to an international 
financial crisis was the 1987 
stock market crash. The Fed- 
eral Reserve provided banks 
and financial institutions 
with generous liquidity on 
preferential rates and toms. 


The Bundesbank, by con- 
trast. warned about incipient 
inflation, a fairly unpopular 
move at the time. On that 
occasion the Bundesbank 
was proved right by subse- 
quent events. 

Eleven years on, the differ- 
ence in attitudes persists. At 
a recent conference in 
Frankfurt, organised jointly 
by the Bundesbank and the 
IMF, senior German officials 
publicly berated the IMF’s 
top management. Jiirgen 
Stark, then a senior German: 
finance ministry official and 
now vice-president of the 
Bundesbank, argued that the 
IMF’s bailout of Mexico after 
the 1994 crisis had directly 
contributed to the current 
crisis. 

He said the bailout had 
triggered a narrowing of 
emerging market bond 
spreads, a sign that inves- 
tors had lost their fear of 
risk. Taken a step further, 
his reasoning suggests that 
the IMF not only failed to 
prevent the current crisis; it 
actually caused it by luring 
investors into a false sense 
of security. 

This is the classic moral 
hazard argument: investors 
cash in on the profits .of 
their investments while the 
taxpayer bails them out in 
the event of a crisis. 

It Is an unfortunate feet 
tbat some sections of the 
German financial establish- 
ment look on the IMF as a 
gang of economic terrorists. 
But the moral hazard argu- 
ment cannot easily be dis- 
missed as paranoia. 

The behaviour of investors 
did form a key element in 
the current crisis, and if 
investors were to be 
rewarded again for taking 
reckless risks, the seeds of 
the next financial crisis 
might already have been 
sown. 

Yet the Europeans have no 
consistent alternative ’ 
approach to offer either, and 
the regular denials only 
maJte matters worse. The 
French were right the ECB 
may need a political counter- 
weight after all. capable of 
providing leadership in 
times of crisis, something 
which Mr Duisenberg has 
conspicuously Tailed to do so 
far. 

^fs/ang.rmmcham&ftcom 




^X’lAL 





cFrtimMrA^rum Lovett 

ate wrong to rep- 
^^nfefiiqv JUbilee 2000 Coali- 
r&^^m&sage as “simply 
debts at a 
sfrwM^-^Mqtal 'debt”. Sep- 
tember^isL^e- call for the 
rancdfetioq tpfTthe unpaya- 
ble debts of the world's poor- 
est countries: by/the end of 
the . year 2000- and. we are 
quite clear that any new 
' resources freed should.' meet 
the urgent human heeds of 
those countries. 

It is not beyond the com- 
bined capability of creditors, 
debtors and civil society In 
debtor countries to ensure 
that this happens - particu- 
larly with the benefit of con- 
structive proposals emerging 
from Oxfem. Christian Aid. 
Cafod and other members of 
the Jubilee 2000 Coalition. 

However, if there is not 
the real political will to act 
on the part of lending gov- 
ernments and institutions, 
the argument over condi- 
tions will be little more than 
academic - and offers a con- 
venient excuse for doing 
nothing. This, as your edito- 
rial states, will certainly not 
do. 

Adrian Lovett, 
deputy director, 

Jubilee 2000 Coalition, 

PO Box 100. 

London SE1 7RT. UK 


-lurry v 

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FINANCIAL TIMES MONDAY SEPTEMBER 21 1998 


17 


COMMENT & ANALYSIS 


FINANCIAL TIMES 

Number One Southwark Bridge, London SE1 9HL 
Tel: +44 171-873 3000 Telex: 922186 Fax: +44 171-407 5700 

Monday September 21 1998 


Unhappy video 
tape precedent 


The decision by the House 
judiciary Committee to release a 
videotape of President Bill Clin- 
ton's grand jury testimony about 
his affair with Monica Lewinsky 
Is unwise and objectionable. It 
sends out some exceptionally 
depressing signals about the way 
the Congress is gearing itself up 
to consider impeachment pro- 
ceedings against the president. 

First, the decision challenges 
long-standing rules providing 
secrecy for witnesses at grand 
jury proceedings. It Is true that 
these have already been under- 
mined by prodigious leaking 
from all sides during the course 
of this inquiry. 

It is also true that Mr Clinton's 
lawyers agreed that his testi- 
mony could be videotaped, to 
avoid the humiliation of him 
appearing in person before the 
jury and to allow any jurors who 
were absent that day to see it 
later. But taking this extra step, 
and putting Mr Clinton’s whole 
performance on display in this 
fashion, sets an unhappy prece- 
dent. 

It is also looks like an explic- 
itly partisan move to embarrass 
the president The vote on Friday 
went on straight party lines. 
Republican leaders have justified 
the move with the argument that 
the public should have the right 
to judge the credibility of the wit- 
ness by watching him under 
cross-examination. 

In reality, of course, most citi- 
zens will not settle down for 
many hours of concentrated 


viewing. Instead, they will watch 
the handful of extracts will 
be pulled out by the news chan- 
nels - and they by definition will 
be the ones that show Mr Clinton 
in a rage, or struggling for the 
weasel words to explain his 
behaviour, or simply at a loss to 
come up with anything to say at 
alL The testimony was no doubt 
a sorry affair, and the television 
channels will present its worst 
moments. 

Finally, the suggestion that the 
American public should be put in 
the position of jurors in this 
affair is just plain wrong.. The 
president's fate should not be 
decided by the opinion polls. It is 
for the Congress to decide, after 
carefully weighing up the facts 
and considering the alternatives 
in a solemn and bipartisan fash- 
ion. 

Politicians must take notice of 
what their constituents think, 
but they also have to take direct 
responsibility for what may be 
the most serious decision they 
will ever be asked to make. The 
behaviour of Congress during the 
Watergate affair seems a model 
in this respect, and appears in 
marked contrast to what is going 
on now. 

With any luck, the decision 
will backfire on those responsible 
for it. As far as one can tell, the 
US public does not relish the 
prospect of further humiliation 
being visited on the president. 
But that is a small comfort on 
what will be another bleak day 
for US politics. 


Iran-Taliban 


Tens of thousands of Iranian and 
Afghani troops are converging an 
their common border, marching 
to an ominously bellicose drum- 
beat Iran will by this week have 
a 250,000-strong force in position 
to sharpen its demand that the 
Taliban militia hand over the 
murderers of nine Iranian diplo- 
mats after the Call of Mazar-i- 
Sharif last month. 

In its recent military triumphs, 
the Sunni Moslem fanatics of the 
Taliban have slaughtered thou- 
sands of Shi’a Moslem opponents. 
The Shiite regime in Tehran is 
trying through diplomacy to pre- 
vent further massacres of its 
Afghan co-religionists, but any 
new incident could ignite a war. 

A war would undermine 
Mohammad Khatami, the reform- 
ist Iranian president trying to 
rebuild a consensual dvfl society 
and bridges to the west, by 
restoring the hardline theocrats 
around Ayatollah All Khamenei, 
the Supreme Leader and armed 
forces chid', to political influence. 
Crushed by Mr Khatami’s elec- 
tion landslide last year, the hard- 
liners have now found the excuse 
to subordinate reform to 
“national security" demands, and 
have already started closing pro- 
Khatami newspapers. 

Open conflict could also spread 
regionally, sucking in Pakistan 
which, with Saudi Arabia, is the 
Taliban's main backer. Turkmen- 
istan, Tajikistan and Uzbekistan 
are worried about the Taliban's 


advance to their borders, the fate 
of their ethnic minorities in 
Af ghanistan , and the subversion 
of their governments by Saudi 
and Taliban-inspired extremists. 

Meanwhile, the US, which has 
colluded in the Taliban's rise, has 
failed to restrain its Saudi and 
Pakistani allies, while still 
talking about - rapprochement 
with Iran. Tehran, unsurpris- 
ingly, smells a plot, but the real- 
ity is more prosaic: Washington's 
policies towards the Middle East 
and Central Asia are simply dys- 
functional. The “Arab Afghan" 
terrorist network of Osama bin 
Laden came into being as part of 
the “blowback" from Washing- 
ton's enthusiastic support for the 
Mujahedin’s holy war against the 
Soviet occupation. And it is a US 
company which bas just agreed 
on a $250m cellular phone deal 
with the neo-medieval Taliban. 

Today at the UN, the US has 
the opportunity to meet at for- 
eign minister level with Iran (as 
well as Pakistan, Russia, and 
Afghanistan’s Central Asian 
neighbours; as part of efforts to 
end the Afghan war. Washington 
should use the opportunity to 
back Iran's demands for redress 
over its slain diplomats, warn off 
the Taliban and make clear that 
it can only win international rec- 
ognition by conforming to Inter- 
national codes of conduct Longer 
term, Washington might also try 
to develop a coherent policy 
towards the region. 


Lost voice 


arst Kdhler is facing a 
ptism of fire as president of 
e European Bank for Recon- 
ruction and Development His 
w charge should have been at 
e front of the international 
stitutions providing leader- 
ip in the Russian turmoil, 
te bank has, instead, been 
table for its silence. 
Disgracefully, the institution 
is left to flounder without a 
esident from January to Sep- 
mber. This was thanks to 
iropean Union governments, 
uch allowed the EBRD suc- 
tion to fall hostage to the 
ggllng over the appointment 
a first governor to the Euro- 
an central hank. The interim 
uiagement’s motto of “busi- 
es as usual" was inadequate 
the challenge of events in 
jscow. Now the bank must 
ickly find its voice if its role 
fostering the transition to a 
irket economy in of east 
rope is not again to come 
o question. 

rhe bank’s first public effort 
address tire Russian crisis, 
0 weeks ago, was not promis* 
>. With loan and investment 
nmitmeuts of $3.lbn, a quar- 
of its total banking portfolio, 
was hardly surprising that 
. EBRD had been struggling 
assess the damage to its own. 
lets. But It owes it to its 
irehoMers to draw wider Ms- 
is from the apparent collapse 
reform efforts in Russia. 


The case for an acceleration 
of the reform effort has never 
been stronger. The need for 
bank restructuring, improved 
standards of corporate gover- 
nance. for transparency and 
regulation of financial markets, 
for greater concentration on 
combating corruption has never 
been more evident 

In the Cast track reform coun- 
tries of central Europe - Hun- 
gary, Poland, the Czech Repub- 
lic and Slovenia - these lessons 
have been learned. The transi- 
tion process has almost cer- 
tainly become irreversible. Cer- 
tainly, they cannot afford to 
waver, given their pursuit of 
early membership of the Euro- 
pean Union. In such countries 
as Romania, Slovakia and Bul- 
garia, however, progress 
remains uncertain. The weakest 
countries, such as Ukraine, are 
teetering on the edge of default. 

Unlike private investors the 
EBRD cannot withdraw from 
these risks. In confronting the 
Russian debacle, therefore, it 
must point out the devastating 
consequences, both for Russia 
itself and for other transition 
countries, of its apparently dis- 
criminatory treatment of for- 
eign Investors. More broadly, 
the bank owes it to its mandate 
to point out the gains that have 
been made by those who have 
undertaken root-and-branch 
reform and the pain to be suf- 
fered by those who foil short. 


Revisiting of a deadly disease 

Financial contagion is spreading to markets across the world. John Plender 
looks at the lessons to be learned from previous epidemics 


S ince the onset of the 
Asian crisis 15 months 
ago, financial contagion 
has spread insidiously, 
and now routinely, to the point 
where markets are being destab- 
ilised on a global basis. The spill- 
over effects, initially from Asia 
and now from Russia, have hurt 
countries regardless of the sound- 
ness of their economic policies. 

Small wonder that the credibil- 
ity of the global financial system 
as an efficient allocator of capital 
is being severely eroded. Govern- 
ments as different in outlook as 
those of Malaysia and Hong Kong 
have responded by introducing 
controls and intervening In 
markets. Others will follow. 

Yet capital mobility r emains an 
article of faith for the western 
policy establishment, even if the 
commitment has become less 
dogmatic in tone. The developed 
world appears unwilling to recog- 
nise that worsening contagion 
may result from flaws in the 
global banking system that call 
for a response closer to home. 

Consider, first, the nature of 
the disease. Contagion comes in 
many forms, which are often 
associated with sudden changes 
in perceptions about risk. The 
common feature is a market 
response out of all proportion to 
economic reality. 

While there is nothing new 
about the phenomenon, the 
potential for contagiously 
induced volatility has been 
hugely magnified by globalisa- 
tion. Thailan d's devaluation last 
year, in which a minor finan cial 
event ballooned Into a regional 
crisis, was a classic Instance. 

From the moment doubt was 
cast on the sustainability of Thai- 
land’s pegged exchange rate, 
local borrowers across the region 
woke up to hitherto unacknow- 
ledged currency risk. They then 
felt obliged to hedge foreign 
currency debts, which put pres- 
sure on their domestic curren- 
cies. 

What started as a technical 
effect changed economic funda- 
mentals across Asia as other 
countries were obliged to devalue 
to preserve competitiveness. The 
weakness of the Japanese yen 
against the dollar made the prob- 
lem worse, by giving rise to fears 
of a Chinese devaluation. 

In the case of the recent 
Russian devaluation and default, 
similar problems were com- 
pounded by a new factor: serious 
damage to the credibility in crisis 
management of the International 
Monetary Fund and the US Trea- 
sury. Hence the widespread 
fallout from a country that was 
marginal in world trade and in 
the global economy. 

As with Asia, there was a ten- 
dency for foreign investors who 
had bought Russian assets with 
borrowed money to sell other 
unrelated investments to satisfy 
margin calls. These sales were 
accompanied by a more general 
“flight to quality", notably into 
the US bond market. 

This is sometimes dubbed 
“pure" contagion, since capital is 
driven not by fundamental eco- 
nomic considerations but by a 
mixture of panic, the herd 
instinct, and the attempt to shore 
up the fund managers' own over- 
borrowed balance sheets. 

The final twist is that the inter- 
ventionist response to contagion 
by Malaysia and others will now, 
in itself, breed another wave of 
contagion, since global investors 
will expect a higher risk pre- 
mium from all emerging markets, 
including market-friendly ones. 
The global nature of this out- 


Have we been here before? 


Net capital outflows 
1 880-1913 (m» of GDP) 


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1B7D-1914 versus 1980- 90s 


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1914 


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1980s 

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break of contagion is not unprec- 
edented. In an earlier period of 
much greater financial integra- 
tion - the gold standard era of 
1870 to 1914 (see chart) - there 
were frequent currency and 
banking crises like today's. In 
1873 and 189446. for example, the 
US gold standard parity came 
under speculative attack. Close 
linkages in capital and commod- 
ity markets provided a powerful 
transmission mechanism for 
shocks. 

Yet there are instructive differ- 
ences between the two periods. 
Technology has vastly acceler- 
ated the speed with which shocks 
are transmitted, thus multiplying 
the destabilising potential of 
news. Concentration of invest- 
ment in professional managers* 
hands reinforces this volatility. 

Perhaps the most important 
difference, though, concerns the 
extent to which capital Hows are 
leveraged by borrowing. As 
David Hale of Zurich Group 
points out, 19th-century capital 
flows were mainly unleveraged. 
About 5.000 British families and 
20,000 continental European fami- 
lies provided personal capital for 
the bond and equity markets to 
finance much of the developing 
world's infrastructure. This was 
mainly “patient", long-term port- 
folio capital looking for a higher 
income return than at home. 

Today, capital is less produc- 
tively deployed and much of it 
has been going to countries with 
high rates of domestic saving. A 
recent IMF study showed that 
capital inflows in the 1990s 
amounted to only 10 per cent of 
domestic investment in emerging 
markets, and that almost half of 
the total net flows during 1990-96 
went into official reserves. These 
were mainly recycled back to the 
developed world in a futile round 
trip. 

And a growing proportion of 
global capital is leveraged, most 
notably in the case of the hedge 


funds. Estimates of global hedge 
fund resources range up to 
$400bn; and many of these 4.000- 
5,000 unregulated offshore funds 
specialise in emerging markets. 
For perspective, that $400bn is 
more than the World Bank's esti- 
mate for the outstanding bond 
market debt of the developing 
countries. It is also more than 
double the combined equity mar- 
ket capitalisation of Thailand. 
South Korea and Indonesia at the 
start of the Asian crisis last July. 

These comparisons do not take 
leverage into account It is not 
uncommon for hedge funds to 


Contagion comes in 
many forms, often 
associated with 
sudden changes in 
risk perceptions 


borrow five or six times their 
investors' funds in pursuit of 
high returns. Further leverage is 
built into the structure of the 
derivative instruments used by 
hedge funds, such as swaps and 
options. 

Mr Hale argues that the world 
has never before bad such a large 
pool of capital dedicated to 
highly leveraged speculative 
activity focused on the markets 
of small- and medium-sized coun- 
tries. Short-termism is an inevita- 
ble feature of the management 
style because such leverage 
imposes abrupt portfolio changes 
when banks make margin calls. 

The markets in such countries 
cannot readily absorb the result- 
ing shocks. The extent of the 
imbalance is well illustrated by 
tbe widely quoted statistic that a 
single hedge fund had a short 
position in the Thai currency last 
year equivalent to 20 per cent of 


OBSERVER 


Full charge 
at the banks 


Who said Canadian banking was 
boring? The battle over mergers 
in the sector Is taking on the 
trappings of a medieval 
tournament 

John McCaBum, the Royal 
Bank of Canada's chief 
economist has thrown down the 
gauntlet, accusing competitor 
ScotiaBank of propagating 
“distortions, myths and 
unsubstantiated assertions" 
about two proposed banking 
marriages. One would see Royal 
join the Bank of Montreal and the 
other would merge 
Toronto-Dominkxi with the 
Canadian Imperial Bank of 
Commerce. 

ScotiaBank. the tone bachelor, 
has urged the federal 
government to block the blissful 
unions, warning of unhealthy 
levels of concentration. So 
McCaDum has chaflenged 
ScotiaBank chairman Peter 
Godsoe to nomfoate his own 
chief economist Warren Jestin, 
to debate pubSdy the mergers. 

Such confrontation is rare in 
the button-dbwn banking world. 
But the merger fight is no 
ortfrary contest White foe four 
banks have staked foeir 
economic futures on foe deals, 
the pditical future of Paul Martin, 
Canadian finance minister, may 
depend on blocking them. 

Martin wants to be the next 
prime minister, which will need 


the backing of his own Liberal 
party caucus. But many 
backbenchers hail from small 
towns that fear half their local 
bank branches will close If foe 
mergers go ahead. Nothing 
would make Martin happier than 
some good, sound reasons for 
saying no. Let the jousting begin. 

Slovakian stars 

So who else is flying In to add a 
touch of badly-needed sparkle to 
prime minister Vladimir Medlar’s 
campaign as the Slovak elections 
enter their final round? 

The latest to turn up at the 
weekend was enduring cinema 
sexpot Claudia Cardinals, who 
joined Meciar on a chat show. 
Somehow, foe prime minister's 
party has already managed to 
persuade supermodel Claudia 
Schiffer to join him in opening a 
stretch of motorway, though 
French actor Jean- Paul 
Belmondo sent his son to cut the 
ribbon on another bit of road. 

The latest rumour is that 
rugged French heart-throb 
Gerato Depardieu is also on his 
way with a pair of scissors. Ail 
the celebrities deny their visits 
have anything to do with politics, 
it's just that they love Slovakia. 
But big business supporters of 
the former boxer- turn ed-p rime 
minister who privatised state 
assets cheaply are dearly 
coughing up cash to bring out 
the stars. 

Meciar does sane things chi 
his own, however. He's just laid 


a foundation stone at a new 
Volkswagen factory; curiously, no 
VW people were present and it 
denies any decision on a new 
plant has been made. 

Alberto opens up 

It wasn't what he said, it was the 
fact he opened his mouth at all. 
Peruvian president Alberto 
Fujimori's mysterious security 
adviser, Vladimiro Montesinos, 
has emerged from the shadows. 

Montesinos, who wears his 
black hair slicked back In the 
style of a 1920s tango singer, is 
de facto chief of the feared 
intelligence services, which have 
played a big role in a successful 
campaign against Peru's rebels. 
But they've also been linked to 
murder, torture and other human 
rights abuses. 

Dismissed as an army captain, 
Montesinos was jailed for one 
year in foe 1970s after being 
charged with selling military 
secrets. He became a lawyer 
defending drug traffickers before 
becoming Fujimori's security 
adviser in 19k). 

His public utterances last 
week, prompted by the capture 
of a guerrilla column, were in 
themselves of little consequence. 
But opposition legislators reckon 
his brief appearance before foe 
cameras forms foe start of a bid 
to clean up the image of the 
second most powerful man In 
Peru. Victor Joy Way, president 
of congress, says he sees no 
reason why Montesinos shouldn’t 


run for parliament in foe next 
elections. Close colleagues say 
he could even have an eye on 
Fujimori's job. His dubious 
record? That’s regarded as more 
of a political challenge than an 
obstacle. 

Ethan hawkish 

Troubled Japanese securities 
outfit Nomura Securities has 
clearly been learning western 
ways. Capital America, its US 
mortgage lending and 
securitisation arm, may have lost 
$2 00m In foe past six months 
and waved goodbye to founder 
and vice-chairman Ethan Penner. 
Blit while departing Japanese 
executives who preside over a 
company's slide into heavy 
tosses tend to express their 
sorrow and shame. 37-year-old 
Penner - he apparently resigned 
because of Nomura's 
unwillingness to leave him in total 
control of the business - appears 
utterly unruffled. The $30m 
severance package he received 
must have helped. 

Even though Capital America's 
tosses are largely the result of 
market forces, rather than its 
unusually aggressive approach to 
tiie business, there are some 
who believe Penner could sound 
more contrite. But he says he 
plans to start his own finance 
company, adding: "Just because 
da Vinci painted foe Mona Lisa 
doesn't mean he stopped 
painting." Let's hope he doesn't 
pant himself into another comer. 




the country's official reserves. 
The scope for destabilisation, and 
for “pure” contagion, in such sit- 
uations is immediately apparent. 

As the recent spate of 
announcements about bank 
losses in Russia has underlined, 
the hedge funds are not alone in 
speculating in emerging market 
securities. The proprietary trad- 
ing activities of the banks are 
likewise directed at exploiting 
short-term trading opportunities; 
and banking itself is a highly 
leveraged activity. 

The readiness of commercial 
h anks to engage in this high-risk 
own-account dealing is all of a 
piece with their willingness to 
finance highly leveraged hedge 
funds. It Is partly a response to 
the loss of their larger corporate 
clients, who now raise money 
directly from the markets. The 
banks have been forced to look 
for new sources of business. 
These are inevitably more risky. 

The striking feature of much of 
this bank dealing activity is that 
it is underwritten by an implicit 
state guarantee, since many of 
the banks are regarded as too big 
to fail. Excessive risk-taking 
could result in a liability on 
developed countries’ taxpayers, 
in the event of losses that posed a 
systemic threat. 

In the early stages of the Asian 
crisis the problem of leverage 
chiefly concerned the plight of 
private sector borrowers in coun- 
tries where financial systems 
were deficient in equity capital. 
As tbe crisis has spread across 
the world, financial instability is 
increasingly being generated by 
creditors rather than debtors - 
witness the extent to which coun- 
tries that are not afflicted by 
obvious economic imbalances 
have been penalised. 

Who, then, can blame those 
like Malaysia's Mahathir 
Mohamad, however unattractive 
their crony capitalism, for impos- 
ing controls on foreign capital? 


He could fairly argue that such 
flows are reliable only in adding 
liquidity when it is not needed 
and taking it away when banking 
systems are in trouble. 

To placate global capital. 
Asians have had to endure 
interest rates that inflict further 
shrinkage on their domestic 
economies. It is hardly surprising 
if they heed the advice of Paul 
Kingman, the US economist, and 
try temporarily to sever the link 
between domestic interest rates 
and the exchange rate. 

Whether tbe introduction of 
exchange controls will work is 
another matter. But the only 
moral as opposed to practical 
objection lies with other emerg- 
ing economies where sound eco- 
nomic policy is now penalised by 
a higher risk premium. 

It is not in the long-run interest 
of the developed world for emerg- 
ing markets to he destabilised by 
excessively volatile capital. If the 
hedge funds and banks misjudge 
the risks in their speculative 
dealing, which is all too plausi- 
ble, there could be a potential 
systemic threat arising from con- 
tagion within the banking system 
itself. This calls for a policy 
response. James Tobin, the Nobel 
Prize-winning economist, has 
argued for “throwing sand in the 
machine” by imposing a transac- 
tions tax. Yet it is hard to believe 
global agreement could be 
reached on imposing such an 
impost 

A more effective restraint - 
and a clear imperative - would 
be an amendment to the Basle 
capital adequacy regime to raise 
the cost of proprietary trading 
and of bank lending to hedge 
funds. It is bizarre that western 
governments have allowed 
insured deposits of the global 
banking system to be used In 
morally hazardous destabilising 
speculation of this kind - espe- 
cially when it could saddle their 
exchequers with a very large bill. 


100 years ago 

Turmoil In Paris 
The wildest and most fantastic 
rumours are being spread. 
Only foe other day, one of 
those Paris sheets which go in 
for sensational items had a 
dramatic account of an angry 
discussion between M. Faure, 
foe President, and M. Brisson, 
the Prime Minister. They were 
represented as being about to 
come to blows, with foe 
Minister of War interposing, 
and the whole Council of 
Ministers holding on to the 
would-be combatants' 
coat-tails. Of course, the 
whole tiling was an invention, 
but such is the present 
upside-down condition of 
things that there were not 
wanting people to believe it 

50 years ago 

Tobacco “Famine" 

Mr. John B. Hutson, president 
of Tobacco Associates 
Incorporated - chief trade 
organisation of American 
tobacco producers - is to visit 
London to took into Britain’s 
tobacco “famine." He is 
expected to make a personal 
check on charges that recent 
British tobacco purchases in 
"soft currency” countries 
discriminated against 
American growers and infringe 
the Anglo-American financial 
agreement 


\ 


i 



• 18 



U N I- RENTS 



TOTAL HEUABtUTY 
WTOOLAND 



MONDAY SEPTEMBER 21 1998 



i ; 

V\ 

I ; 


THE LEX COLUMN 


Un-Pacific alliance 


Want to wave a red rag at a regulator or 
two? Tell the world you plan to expand an 
alliance which has yet to get regulatory 
approval even In its original form. The 
BA/AA tie-up has been two years in the 

wran g lin g and although the ^hapn- gf g 

deal Is emerging, it could still be scup- 
pered. BA/AA may judge the riwnanfa to 
give up rather than sell landing and take- 
off slots too heavy a flnanriaj sacrifice. 
The US authorities may strike a tougher 
stance on opening up Heathrow airport to 
US airlines. So is this really the time i for 
BA/AA to up the ante? The answer is yes. 

If BA/AA does not lock in the few foot- 
loose and desirable airlines left, such as 
Cathay Pacific, others will. BA/AA has 
already lost valuable ground to the Star 
alliance, headed by Lufthansa and United 
Airlines. Of course, the timing could be 
better. Trumpeting a tie-up with an Asian 
airline that has just recorded its first loss 
in more than two decades damps the 
excitement- But these alliances are in it 
for the long haul. BA/AA needs an Asian 
leg to compete with Star and Cathay is 
still a valuable franchise. Eyebrows may 
rise in Brussels, London and Washington 
on news of a new BA/AA partner. But It 
should not affect the regulators' decision, 
on whether to allow the BA/AA alliance. 
That debate is essentially about competi- 
tion on transatlantic routes and an open- 
skies deal between the UK and US. 

Mexico 

When it comes to weathering interna- 
tional shocks, Mexico has an advantage . 
over its Latin American neighbours . - 
recent experience. Spurred by the 1995 
"tequila crisis", Mexico has opened its 
economy, privatised its banks and pushed 
through fiscal reform. Despite a sharp fell 
in the price of oil, which brings in a third 
or government revenues, the fiscal deficit 
is a manageable IV! per cent of GDP. Most 
important of all, by allowing its currency 
to float freely, Mexico can absorb much of 
the pressure on its economy through the 
exchange rate. 

That does not mean everything is 
peachy. Although the peso has declined 14 
per cent since mid-August, interest rates 
have still doubled to more than 40 per 
cent. Not surprisingly, the economy is 
slowing sharply, though it should still 
grow 2 per cent next year, when Brazil 


Mexican equities 
Marico IPG Wax 

5500 



will probably be in outright recession. 
Mexico also has high debt levels, with 
about Sl50bn of combined public and pri- 
vate sector external borrowings. But at 36 
per cent of GDP that is comparable with 
Argentina and lower than most Asian 
countries. Meanwhile, domestic debt at 
$30bn is small. 

One of the reasons Mexico has been 
badly hit despite decent fundamentals is 
its relatively unstable domestic politics. 
The opposition-led congress delights in 
embarrassing President Zedillo's adminis- 
tration. But investors should remember 
that Mexico has an ace in the hole: its 
strategic importance to the US and mem- 
bership of the Nafta free trade area should 
guarantee a swift intervention from Unde 
Sam if the trouble worsens. 

Pernod Ricard 

The sale of Orangma to Coca-Cola for 
FFr5bn ($887), about four times sales, 
always looked a juicy deal for Pernod 
Ricard. No wonder it remains keen to sort 
out the distribution issue which appears 
to be blocking the transaction. However, 
if Coca-Cola does sign away distribution 
of Orangina to raturing outlets, it may 
seek compensation via a reduced offer. 
And if the conditions sought by the com- 
petition authorities are even more oner- 
ous, it might walk away. 

Such obstacles could be seen as anti- 
foreign takeover activity by the French 
government But this would be largely 
misplaced. Coca-Cola has 37 per cent of 
the French soft drinks market Add In 10 


per cent for Orangina and Coke would be 
about four times the size of Its nearest 
rival, Cadbury Schweppes. That Is bound 
to ring alarm bells, even though a market 
that exdudes fruit juice and bottled water 
Is rather narrowly defined. In any case, 
the •main trade wwipiaiwant u another US 
company, PepsiCo, which Is making vigor- 
ous use of anti-trust regulations to try to 
thwart its enemy in the US and Italy as 
well as France. 

If the deal through, Orangina, an 
under-exploited brand, might be attractive 
- at a lower price - to other rivals. Mar- 
ket conditions do not favour a flotation 
and an independent Orangina would stiff 
lnp.fc inte rnational marketing clout, with 
FFrlQbn already in the bank, Pernod 
Ricard has no need to sell out cheaply. 

US earnings 

Squeezed between crisis overseas and a 
slow do wn at home, even mighty corporate 
America is starting to wobble. Third quar- 
ter warn trigs are expected to show a small 
dentine - the first such fall since 1991, 
according to First Call, which collects 
analysts’ forecasts. Commodity and tech- 
nology stocks have long been suffering. 
But they are now being joined by a worry- 
ing number of blue chips, from Walt Dis-. 
ney to Gillette. Meanwhile, financial 


stocks, previously star performers, have 
been hit hard by overseas trading losses. 

The outlook is equally bleak. Do not be 
fooled by bottom-up analysts' forecasts of 
19 per cent for 1999. Their forecasts have 
proved hopelessly wrong this year. Even 
the more sober-minded expectations of 
top-down equity strategists, for about 8 
per cent growth next year, may pro v e 
optimistic. 

Where does that leave valuations? Hav- 
ing corrected by 15 per cent, the SAP 500 
index is trading at a price/eamings ratio 
of 21 times for 1999, down from its peak of 
more than 25 times. The key now is 
whether expectations of long-term earn- 
ings gro w th are changing. So for, these 
have remained unimpaired at about 12 per 
cent a year for the next five years. But as 
the crisis drags on, this number is becom- 
ing less believable, especially since the 
S&Fs historic growth rate Is only 7 per 
cent Once long-term forecasts fall, even 
rinriinteg bond yields may not be enough 
to support stocks. 


CONTENTS 


News 


European News — — ... 

Asia-Pacific New. 

American News 


tetetnadoral News ....... 

UK News 

Weaher 



Features 


2.3 




in-ii 



15 

5 


_ 17 

.. 6 


._. 16 

.. 7 


17 

IB 

Cnamoni Puzzle — 

_3B 



The gap is narrowing as Chancellor Kohl doses on rivals In opinion 
polls ahead o I Sunday's federal election in Germany. Page 2 Picture: AP 


Companies & Finance 


News . 


Companies In ttris issue... 

Global Investor™.. 

Mxtot Movers 

International Bonds 


FT GuMa to World Currencies- 

Emerging Markets. 

Martas Weak 


. 21-24 

— 19 
19 

— 21 

24 

24 

— 23 

— 25 


New Intamattanat Bond Issues 25 

Companies Diary 25 

Money markets 26 

Recant Issues, UK. 25 


London share sendee „ 
Managed funds sendee 
World stock Markets — 


28,29 

30-32 

33 

FT/SW-AWortd inffltts 33 

New York Stock Exchange 3435 

World markets at a glance 25 

Economic Diary... 36 

Survey 

Mastering Marketing.— Separate Section 


FT.com 


FINANCIAL TIMES 


Directoty of online services 
via FT Bectrortic Publishing 


FT WEATHER GUIDE 


Europe today 

Norway will be cloudy and wet 
Northern Sweden will have rah. 
clearing to sunny spells and 
scattered showers. Southern 
Sweden and Denmark will be dry 
with sunny spefls. Finland wai have 
some rain. The Low Countries, 
Germany, Austria, Switzerland and 
France wffl have fog patches to 
start but these should dear by 
midday to give plenty of sunshine. 
Many parts of the Mediterranean 
and Balkans will have heavy 
showers, especially across die 
south of the Iberian peninsula. 

Five-day forecast 
Central and eastern parts of the 
M edit erranea n wni be showery 
throughout the week, the showers 
being thundery and prolonged in 
places. High pressure will keep 
central and northern Europe dry 
and settled, with most parts hawing 

long sunny periods, although 

overnight tog may persist «i places. 


tout's rairaATures 

Maximum 


, * .. . ' a a * _27 ^ ? -Wf- 


Primakov asks west for 
help to underpin 



Russia needs to win time to make ‘essential.’ corrections, PM says 


By John TfiornNI in Moscow 


Yevgeny Primakov, Russia’s prime 
minister, yesterday said his country 
had sufficient reserves to avoid 
defaulting on Its debts but appealed 
Iter additional financial support to 
underpin future reforms. "Foreign 
help is needed, very needed," he 
said. 

This week, the Paris Club of sover- 
eign creditors will meet to discuss 
Russia’s debt burden after it missed 
virtually all of an DMSOOm (5440m) 
interest payment on restructured 
Soviet-era debt. The Paris Club will 
also discuss ways of rescheduling an 
estimated $54bn of Indonesian debt. 

Acknowledging foreign investors 
had last confidence in Russia In the 
wake of the country's financial melt- 
down, Mr Primakov said his govern- 
ment would make every effort to 
entice them back, although talks 
with the International Monetary 
Fund ended inconclusively last 
week. “They say to us: draw up a 
programme and it Is possible we will 
support it with credits. But it would 
be good if the international organisa- 


tions understood that we need, the 
credits to win time to stay on' the 
reform course while conducting-, 
some essential corrections," Mr 
Primakov sakL 

Other ministers have warned that, 
.if the IMF does not soon -release' the 
next $4-3bn tranche of - Its support, 
loan, the government will be forced 
to .print money to pay delayed wages 
and pensions. The central bank has 
already -begun injecting large-scale 
credits' into Russian banks in an 
attempt to free the paralysed hank- 

mg system- 

The central bank last week con- 
ceded it would print billions of rou- 
bles to dear Russia's gridlocked pay- 
ments system. The bank has in 
effect agreed to print money to 
redeem, frozen, government debt at 
par, anoMiwg commercial banks 'to 
pay their depositors. The bank will 

arnirmnra far ther de tails today but 
one government source suggested it 
could involve the issuance of about 
RbsSbn of new money. 

The government is also thought to 
be considering printing up to an 
additional Rbs45bn this week to pay 


wages and pensions. The aim is to 
draw the sting out of a day of mass 
protests planned for October 7. 

The Russian media, which whole- 
heartedly approved Mr Primakov’s 
appointment, has been growing 
increasingly critical of the prime 
minister's cautious moves to deal 
with the country's deepening eco- 
nomic crisis. 

The Kommersant business news- 
paper oh Saturday accused Mr Pri- 
makov of achieving “catastrophi- 
cally little" since being approved on 
September 11. - 

After a brief recovery, the rouble 
has been plumbing new depths in 
recent days while Russia's tradeable 
Soviet-era debt, known as Prins, fell 
on Friday to less than 8 cents on the 
US dollar, implying an extremely 
high risk of default 

To add to Mr Primakov's concerns, 
Yurt Skuratbv, the prosecutor gen- 
eral, last week launched an investi- 
gation into whether the central bank 
had misused the proceeds of a $43bn 
loan disbursed by the IMF in July. 


Russia's topsy-turvy world, Page 3 


FLcm me Rnanctal Ttaw web site; 
orflne mm, comment and aiteyds. 

httpjtowwH.am 
The Archive: onfra Rhtee ol tack Issues 
of tea newspaper sfcw «M>» 1998. 

MpJfmmjnMnJFTjm 
M nwep apar wl wate *—: l uftmuMlun . 


olhra and onlhe ontettag. 

tX^AiwwJtrai]AimiKpmxrtub6crib6Jitni 
FT Aoaami Reports Santa onOna orter- 
Ing of mud or Interim report! and 
account of 1200 UK pfcs 

cajBm tow to g* share prtces and mar- 
kat reports by tetaplwre and textor*. 

http-J/wm. n.com/newspapo/21 76Mn 
Smwje details oJ farttaxring edtortal 
scrap. 

t^tomvJUnm/newpap#/236BMm 



Wtsd speed ta KPH 

Situation at midday . Tampvaturos maximum for day. Rmcasts by “KWEATHERCENTRE 


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Caracas 

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Barcelona 

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For 

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Fair 

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Casablanca 

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Boftot 

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Chicago 

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Mpada 

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Cotogns 

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Bonn 

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Dean 

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Bosnia 

snow* 

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Dan 

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Bortov 

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FOQ 

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CJwgen 

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Edhteagn 

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MKttd 

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Frankfurt 

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Gama 

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Mam 

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Ftoraa 

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Manchester 

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Hamburg 

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Maboume 

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tetePM 

Hang Kong 

Sun 

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Msml 

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Stockholm 

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HanoMu 

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Ftir 

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MflM 

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Montraa 

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MOKOW 

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TaAvtv 

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Jorarwwehura Fair 

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ranm 

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Tokyo 

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Karachi 

Far 

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Manila 

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Toronto 

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Ktawa 

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Nmmm 

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Vancouver 

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L Angara 

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N«wY«k . 

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London 

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waengton 

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20 

Prague 

Fair 

18 

Wtnlpag 

Sun 

11 

Madeira 

Fair 

26 

Rangoon 

Thundar 

32 

Zurich 

Fear 

16 


Sweden faces weakened minority 
government after SDP poll knock 


By Tim Burt in Stockholm 


Sweden was last night braced for a 
weakened minority government fol- 
lowing the worst election perfor- 
mance in more than 70 years by the 
ruling Social Democratic party. 

Although the left-of-centre party 
looked set to remain the largest par- 
liamentary group, early results in 
yesterday's poll indicated the SDP 
would be unable to farm a workable 
government without the support of 
the former communist Left party, 
which seeks a sharp increase in pub- 
lic spending and favours Sweden's 
withdrawal from the European 
Union. 

Support for the SDP - architects 
of Sweden’s generous welfare state - 
looked set to foil from 45.3 per cent 
In the 1994 election to 3&6 per cent 
following defection to the Left of vot- 
ers discontented at the government's 
tight spending policies. The Left saw 
its share of the vote jump from 6^ to 
135 per cent 


The results, if confirmed in the 
final count, -would represent the best 
showing by the Left party since 1945 
and. could mark a watershed for the 
SDP, which, has ruled for 57 of the 
last 66 years. The turnout fen to 
below 80 per cent for the first time in 
modem Swedish history. 

As 6.7m Swedes went to the polls, 
several economists warned that an 
SDP government relying on the Left 
would be forced to embark on expan- 
sionary spending policies and would 
further delay any decision on Swed- 
ish participation in European eco- 
nomic and monetary union. Such a 
pact would almost certainly rule out 
any cut In Sweden’s high income 
taxes. 

Gdran Persson, the Swedish prime 
minister and SDP leader, yesterday 
said his party could co-operate with 
any party excluding the Moderates, 
but he appeared to rule out a formal 
coalition with the Left 

“We have never talked of forming 
a coalition government with the Left 


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party,'' said Mr Persson. T want a 
strong Social Democratic govern- 
ment, but I will not sit In one that 
starts risking the state finances." 

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crats would have to rely on the Left 
to enact legislation. If the SDP failed 
to reach an agreement with the Left, 
it could clear the way for Carl Bfldt, 
the Moderate party leader and for- 
mer international peace envoy to 
Bosnia, to form a four-party non-so- 
cialist government. But such a com- 
bination may also faff short of the 
175 parliamentary seats needed to 
form a majority. 

Support for the Moderate party is 
thought to have remained fiat at 
around 22 per cent, while the cen- 
trist Christian Democrats have seen 
their support more than double from 
their 4.1 per cent in the last election. 
The Christian Democrats - commit- 
ted to a tax-cutting coalition with 
the Moderate, Liberal and Centre 
parties - have ruled out an alliance 
with the SDP. 


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‘ ' BA hopes alliance plans will 
lift its ailing share price 

Robert Ayling (left), 
British Airways* chief 
executive, and Don 
Carty, head of Ameri- 
can Airlines, will this 
morning reveal they 
plans to conquer the 
work! At a Joint Lon- 

don press conference, 
the two are expected 
to announce that 
Cathay Pacific, the 
Hong Kong-based car- 
ter, will join their planned worldwide affiance. 

Mr Ayflng will be hoping his evident determina- 
tion to create a force capable of taking on the 
stx-airHne Star Affiance wQl lift investor confi- 
dence in his company. BA Is widely admired, 
and often feared, by competitors. Shareholders 
have been less impressed. Page 20 

Alaiming welcome for Hat chairman 

Whan Pauto Fresco, who next month becomes 
chairman of Flat, made his first public appear- 
ance at the annual meeting of Italy’s largest 
manufacturing company in June, the company 
was flush with record profits and revenues. 
Barely three months later, senior executives are 
sounding the alarm bells and analysts are revis- 
ing downwards earlier profit estimates. Page 21 

Africa considers integration 

The twin forces of economic liberalisation and a 
decline in overseas aid have seen governments 
from the Sudan to Malawi open stock markets 
fn the last decade. But analysts say many sub- 
Saharan markets are too small to be viable and 
should be merged to function on a regional 
basis. Page 23 

Siemens orders surge after US deal 

. I. Adolf HOttl, the president of KWU, Siemens' 
power plant division, has taken up golf, the 
favourite game of US business. His move, in the 
name of US-German cultural cohesion, follows 
the purchase of Westinghouse's electricity gen- 
eration arm. However, the commercial benefits 
of the merger have been even quicker to mani- 
fest themselves In a surge of orders that threat- 
ens to swamp toe US factories of Siemens 
Westing ho use Power Corporation. Page 22 

Merrill offers hindsight bonds 

A new type of investment bond that carries out 
asset-allocation between European markets with 
the benefit of hindsight could become common 
as Merrill Lynch prepares to lend the weight of 
its name to a DM1 bn ($591 m) issue. Page 24 

Europe's focus turns to German polls 

European equities will remain under pressure 
this week because of mounting concern ova- a 
global economic slowdown, toe election in Ger- 
many and the meeting between President Cltn- 
, w ton of the US and Japan’s prime minister Kaizo 
Obuchi. Page 27 

Swiss split over gold reserves sale 

Swiss public opinion is divided over whether the 
central bank should sell part of its gold 
reserves, according to a new poll. Page 24 


FT GUIDE TO THE WEEK 
- full listings Page 36 

^FINANCIAL PROBLEMS 
World financial problems will dominate 
discissions when European Union finance 
ministers gather In Vienna tor a two-day 
informal" meeting, starting Friday. Rudolf 
Edlinger, finance minister of Austria, holder of 
toe rotating EU presidency, win update ministers 
on developments In Russia following a planned 
visit there during toe week. 

KOHL’S CROSSROADS 

Germany votes on Sunday to decade Its 

government for the next four yeas. After 18 
years as chancellor, Helmut Kohl Is fighting for 
re-election against Gerhard SchrOder, toe Social 
Democratic candidate. Opinion polls put Mr 
SchrOder ahead, but in Bavaria's state elections 
this month pre-poll projections were Inaccurate. 


COMPANIES IN THIS IS SUE 

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19 






AT&T Canada 
American AMnes 
Angto American Plat 
BCTai 
BHP 

Bell Canada 
British Airways 

cbot 

CLT-Uta 
CME . 

Cathay Padfe 
Cemex 

Chang Hwa Com Bank 
Coca-Cola 
-, Eureko 
Rat 

First Comm. Bank 
ft# Bactric 
GaUFMdsofSA 
GrapMwIt 
Hombmeftt & Qufsl 
Hongkong Tatocom 
Hub Nan Comm. Bank 


22 Kyokufchi 
18 LTCB 

23 Marmeamann 
22 Mattf 

24 MarrIB Lynch 
22 Mttsukoshi 

Nestle 
Old Electric 
Ofivattl 
Orangfna 

Pewta 

Pernod Rteard 

PhSppIne AMnea 

FolyQram 

Salomon Smith Barney 23 
Seagram 23 

Semen Greek 23 

4 Siemans Weatinghousa 22 
84 Sprint Canada 22 

Seangyong 24 

22 
22 

4 UAL 19 

4 Yahagl 24 


23 


23 Sttrtor 

24 Telus 



mar k et statistics 

BasetaxMonM 28 Fanfgn aMtangB 28 

B 4 ttftrasfcG«t tends 28 London meant tosa* 25 

BnprtKflBy - as uodwitenaM 28,29 

DMdMdi aid company * Menaced taifc sank* 30-32 
FTS&SHt Worti ttSOI Monty mtocaB 28 

FTGMltemMK aSHorMteodiwa .» 

FT Stida to cmmctts 24 SWuwriitm ■■tfanci 35 


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★ 

FINANCIAL TIMES 

COMPANIES & MARKETS 

eisreuNcuL 7MB uns im MONDAY SEPTEMBER 21 1998 Week 39 


brother 


PRINTERS 
FAX MACHINES 


CLOUD CAST OVER OBUCHI-CLINTON MEETING AS BIPARTISAN SUPPORT FRACTURES OVER BEST WAY TO DEAL WITH AILING LTCB 


Dispute hits Japan’s bank reform plan 


By lAcMyo Nakamoto h Tokyo 

Cracks yesterday started to 
appear in the cross-party 
agreement on hanking reform 
struck in Japan at the end of 
last week - with the govern- 
ment and opposition divided 
about the future of the ailing 
Long Term Credit Bank 
The split could lead to the 
collapse of the reforms, which 
pave the way for measures to 
tackle the country’s massive 
bad loan problem. Any divi- 
sions will cast a shadow over 


tomorrow's meeting between 
Japanese prime minister Keizo 
Obuchi and US president Bill 
Clinton. 

Mr Obuchi was to present 
Mr Clinton with Friday’s 
agreement as proof that the 
Japanese government was 
Tnairinp progress in tackling 
the country’s massive bad debt 
problem. 

The news could also cause 
ftirther fails in the stock mar- 
ket “The market is going to be 
disappointed,” said James 
Fiorillo, banking analyst at 


INC Barings in Tokyo. “On 
Friday night, they reached an 
agreement But the devil is In 
the details.” 

The agreement between the 
ruling Liberal Democrats and 
apposition parties came on Fri- 
day after weeks of intense 
negotiation. However, it 
became clear over the weekend 
that the LDP and the opposi- 
tion Democratic Party of 
Japan hold widely divergent 
interpretations of the deal. The 
LDP needs the co-operation of 
the o ppos i tion since it does not 


have a majority in the Upper 
House of the Diet 

Naoto Kan, leader of the 
Democratic Party, warned yes- 
terday that the differences in 
interpretation could lead to 
the agreement bang annulled. 
He also called on members of 
his party to prepare for a gen- 
eral election, indicating that 
the instability of the govern- 
ment increased the chances 
that parliament would have to 
be dissolved. 

The agreement stated that 
the Long Term Credit Bank 


(LTCB) - which has become a 
test case for the government's 
policy on troubled banks - 
would be placed under “special 
public administration", or 
dealt with through “other mea- 
sures". The opposition believes 
this means the LTCB will be 
nationalised. It insists that the 
agreement calls for the aboli- 
tion of a Yl3,000bn ($89bn) 
public fund to recapitalise 
weak banks, such as LTCB. “It 
has been confirmed between 
Prime Minister Obuchi and 
myself that the Yl3,000bn fund 


would not be used to inject 
public funds into LTCB,” said 
Mr Kan. 

But the LDP Insists that the 
expression, “other measures", 
leaves the option of using the 
Y13,OD0bn public fund to recap- 
italise LTCB without treating 
It as a collapsed bank. 

“We bope to employ the 
[opposition-proposed] scheme 
to put LTCB under state con- 
trol ■ . . but we would also like 
to have a few more choices,” 
said Yoshlro Mori, secretary 
general of the LDP. yesterday. 


Union veto ousts 
UAL chairman’s 
chosen successor 


By Richard Waters in New York 

The heir apparent at UAL, the 
parent of United Airlines and 
the biggest employee- 
controlled company in Amer- 
ica, has quit after it became 
dear that two unions repre- 
senting workers would not 
back him to become the com- 
pany’s next rihainmiTi 

News that John Edwards on 
had resigned emerged on Fri- 
day after the stock market 
closed. Shares in the company 
could suffer when trading 
resumes today. While dis- 
trusted by the unions, the UAL 
president and chief operating 
officer was highly regarded on 
Wall Street where he has been 
credited with helping to turn 
UAL into the country's largest 
airline. 

Gerald Greenwald, expected 
to retire as the company's 
chairman next year, mid of Mr 
Edwardson: “Both the board 
and I have the highest regard 
for his potential as a CEO." 
His chosen successor had 
decided to resign after realis- 


ing the heads of the Interna- 
tional Association of Machin- 
ists and the Air Line Pilots 
Association would not support 
the appointment 
The resignation marks the 
second time the airline's 
unions have exercised a veto 
over the company's manage- 
ment Th e y also demanded the 
head of Stephen Wolf, the for- 
mer chairman who was instru- 
mental in handing control to 
employees in *h» first plana 
Mr Wolf agreed to give 55 
per cent of the company to its 
employees in return for wage 
concessions in 1994 — the fur- 
thest any US airline went at 
the time in efforts to survive 
an industry-wide downturn. 

The management disruption 
at UAL is the latest sign of 
how labour relations have 
worsened In spits of the power- 
ful rebound in airiina profit- 
ability and the fact that a large 
slice of equity ownership Is 
now in the h»»rig of unions. 
Northwest Airlines, the fourth 
largest, is recovering from a 
strike by its pilots, who argued 



they were not benefiting 
enough from the turnaround 
In company fortunes. 

Mr Edwardson's departure 
comes as UAL prepares for 
negotiations over union con- 
tracts that expire in 2000. Lack 
of union support for him was 
seen on Wall Street as an indi- 
cation lminnn feared he would 
have tried to drive a hard bar- 


gain. Stating his reason for 
quitting, Mr Edwardson said: 
“United does not need a dis- 
tracting or disruptive succes- 
sion process." A ftirmw execu- 
tive vice president of 
Ameritech, the regional tele- 
phone company, he Joined 
UAL as president in 1994 and 
became chief operating officer 
a year later. 


Eureko to pull out 
of North America 


By Christopher Bnwm-Humes 


Eureko, a pan-European 
alliance linking six Insurance 
groups, will announce today 
that it is pulling out of North 
America with the sale of its 
Canadian and US businesses 
for C$300m (US*200m) 

Jeff Medlock, managing 
director, said the moves would 
enable the group to develop 
further its interests In Europe, 
including former Iron Curtain 
countries. 

The bigger deal involves the 
sale of Seaboard North Ameri- 
can Holdings to industrial Alli- 
ance, a leading Canadian life 
assurer, for C$265m in cash. 
Seaboard has assets of C$1 Jbn 
and last year achieved an 
annual inrame of C$275m. 

Eureko Is also selling Vasa 
North America and Seaboard 
Life Assurance in the US to 
Centris. a US stop-loss insurer, 
for about 935m. 

Eureko, which is held 
together by an Intricate web of 
cross-shareholdings, was 
formed in 1992. Its biggest 
shareholder is Achmea of Hol- 
land with 34 per cent, followed 
by Friends Provident in the 
UK with 21 per cent. Other 


members are Germany's 
Par ion, Portugal's BCP, 
Topdanmark in Denmark and 
LdnsfbrsAkrlngar Wasa in 
Sweden. The companies keep 
exclusive access to their home 
markets but collaborate Inter- 
nationally. 

Mr Medlock said the North 
American market had become 
Increasingly competitive. The 
company faced a choice 
between growing to gain criti- 
cal mafia or p ullin g out. 

The group wants to expand 
Its European presence Anther 
to exploit the cross-border 
opportunities offered by the 
single market Its most obvi- 
ous gap is France. 

The group is also hoping to 
announce a tie-up with a sev- 
enth European partner, Swiss 
Mobihare, in October. Eureko 
has also acquired a company 
in Slovakia and announced a 
tie-up with Bank Gdansk! in 
Poland. 

Mr Medlock said the com- 
pany ultimately intended to 
get a stock market listing. 

This month, Eureko said 
first half net income had risen 
67.5 per cent to FI 82.9m after 
growth in premium income 
and Investments. 


Rainer Gut to become non-executive chairman of Nestle in 2000 


By WOlam Hal in Zwich 

Rainer Gut, Switzerland's 
best-known international 
banker, is to become non- 
executive c h ai rm an of Nestlfe, 
the world’s biggest consumer 
food company. 

The appointment in 2000 of 
Mr Gut, who has dominated 
Credit Suisse Group for more 
than two decades and chaired 


it for the past 12, surprised 
some observers. They had 
expected him to concentrate 
on his non-executive director- 
ships when he retires from the 
banking group. 

Mr Gut, who turns 68 this 
week, will move to chair a 
company that is more than 
twice the size of Credit Suisse 
and employs more than three 
times the staff. His non- 


executive directorships include 
Daimler-Benz, Pechiney and 
Union Carbide. 

Nestlfi announced a reshuffle 
on Friday along with its first- 
half profits, which showed a 
7.4 per cent increase in net 
profits to SFr2bn ($1 Jbn) and 
an improvement in net profit 
margins. The group's shares - 
the best performing stock in 
the Swiss Market Index of 


blue-chip stocks this year - 
rose SFf 54 to SFr2,660. 

The reshuffle at the top of 
two of Switzerland's best- 
known companies also settled 
the future of Lukas MOhle- 
mann, 48, the ex-McKinsey 
consultant who has been 
responsible for transforming 
the fortunes of Credit Suisse. 

There had been speculation 
that Mr Mflhtemann, a former 


chief executive of Swiss Re, 
might leave. However, Credit 
Suisse named Mr Mflhlemann 
to take ova- from Mr Gut as 
chairman. He wifi continue as 
chief executive. 

Nestlfi and Credit Suisse 
have close boardroom ties. 
Until May 1997, Helmut 
Maucher, the Nestlfi chairman 
who retires in 2000. was vice- 
chairman of Credit Suisse, and 


Mr Gut has been a non- 
executive director of Nestlfi 
since 1981 and a vice-chairman 
since 1991. Peter Brabeck- 
Letmathe, Nestis's chief execu- 
tive, sits on the Credit Suisse 
board. 

Analysts welcomed the fact 
that Mr Brabeck, 53, who took 
over as Nestlfi's chief execu- 
tive in June 1997, will continue 
to concentrate on the role. 



RICHARD WATERS 

GLOBAL INVESTOR 


The global margin call 
leaves markets in a funk 


Junk bonds at a premium of 
more than six percentage 

points to US Treasuries. 
Argentina - its domestic 
money supply backed in full 
by US dollars - at yields more 
♦ban io points higher. Two 
months ago, bargains like 
these would have flown off the 
shelves. Two months from 
now, they may do so again. 

For now, t hough, large 
tracts of the fixed-income 
markets are in a deep funk. 
And when you stop to examine 
the dynamics of the modem 
capital markets, it Is not hard 
to see why. 

Forget the fundamentals. 
Whoever first described this 
summer’s n^anmal shock as a 
"global margin call" was right 
In the new era of 
securitisation, bad news 
ricochets quickly around the 
markets - and Wall Street, 
which is further down the 
securitisation road than the 
rest of the world, is feeling the 
pain worse as a result 

The disciplines of marking 
to market and the daily 
margin call have become the 
dominant forces of this era. if 
prices fell in one market, the 
loss has to be taken at once: 
cash margin calls must be met 
That triggers the liquidation of 
other positions, leading to a 
Dight from risk and paralysing 
Illiquidity that now has so 
many markets by the throat. 

The rolling margin call was 
progress i ng in slow-motion 
until Russia defaulted - since 
then It is has been a rout 

4 

1: . 


This devastating process 
seems open-ended. As a risk 
management expert at a New 
York said: Tm not even 
sure 1 know bow we win be 
able to tell when it has ended." 

For now, it Is probably safe 
to conclude that it hasn't 
Marking to market doesn't 
work when there is, in effect 
no market, says Henry 
Kaufman, a Wall Street 
economist Who knows what 
the real loss is on Russian 
debt? 

In this period of deep-freeze, 
“the illiqmd risk positions are 
still rock-solid bard in some 
unsuitable hands”, says the 
New York risk manager. 

The band of hedge funds and 
other investment gunslingers, 
answerable to no one but the 
inexorable law of marking to 
market are caught in limbo as 
a result. 

No wonder Wall Street is rife 
with talk of gunslingers like 
John Meriwether searching for 
another Si bn or so of fresh 
ammunition to replenish their 
armories. Ethan Fenner, the 
man who generated most of 
Nomura's profits in the US in 

the 1990s through securitised 

real estate finance, says he is 
leaving (with a $30m 
handshake) to start afresh. 
Nomura, needless to say, will 
keep the toxic idle of 
commercial mortgage-backed 
bonds be left behind. 

Perhaps there are fresh 
supplies of capital waiting to 
be ploughed through, and a 
new army of investors with an 


unsated appetite for risk ready 
to came to the rescue. After 
the bloodbath of the past two 
months, though, that seems 
unlikely. 

For now, the luxury is to be 
subjected to an accounting 
regime that does not force you 
to fafcp frho pain — something 
that few an the securitised 
Wall Street of the ISBOe enjoy. 
“If you can take a five-year 
view and don’t have to mark 
to market, you’re in a much 
better position,” says the risk 
manager. For everyone else, he 
adds, the requirement for 
transparency has added to the 
general sense of risk aversion. 

Even the favoured few, 
however, may be advised to 
wait longer before diving bade 
into tbe markets. It seems a 
safe bet that more victims of 
the global margin call will 
emerge in the weeks ahead. 
Remember 1994, the nearest 
equivalent, when soaring 
long-term bond yields took 
TnrmfliB to wash through the 
markets, forcing Orange 
County into bankruptcy and 
helping to drive a stake 
through the heart of 
investment bank Kidder 
Peabody? 

This is shaping up to he 
much worse. If things get 
really bad, the illiquidity and 
losses that have already sunk 
a handful of fringe hedge 
funds could yet take down 
some of the big boys - and 
perhaps even an investment 
bank or two. Now that would 
be a buying opportunity. 


e-f-g 



1 


...in tune with our clients. 
Enjoy our performance. 


EFG fftooafe G&ank 


MNEVt ZL-RK.H LMItANNE LON l> I1N ATI UN) LUlFUkUUUi MONALI1 

Ul'IRNIFV JFR’ifV MIAMI LJlllPAlHH BRITISH VlIfilAi KLAMK BERMUDA 


KFI. PRIVATE RANK HMITEn II RtbUIATLD IV IHID IN THE UK 



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20 


FINANCIAL TIMES 


MONDAY SEPTEM^Er Ii 1998 


COMPANIES & FINANCE: UK 


i -i 


BA tries to propel its shares through the cloud layer 

Michael Skapinker on Robert Ayling’s intention to lift investor confidence 


R obert Ayling, British 
Airways' chief execu- 
tive, and Don Carty, 
head of American Airlines, 
will this morning unveil 
their plans to conquer the 
world. 

At a Joint London press 
conference, the two are 
expected to announce that 
Cathay Pacific, the Hong 
Kong-based carrier, will join 
their planned worldwide alli- 
ance. The alliance, which 
has yet to receive UK and US 
regulatory approval, is also 
expected to include Qantas 
of Australia, Japan Airlines 
and Iberia of Spain. 

Mr Ayling will be hoping 
his evident determination to 
create a force capable or tak- 
ing on the six-airline Star 
Alliance will lift investor 
confidence in his company. 
BA is widely admired, and 
often feared, by competitors. 
Shareholders have been less 
impressed. 

BA’s shares open this 
morning at 411p. On July 7. 
they stood at 708p. Over the 
past year, they have under- 
performed the FTSE 100 by 
40 per cent. 

Yet this is a company that 
attacked its cost base with 
vigour when the economy 
was strong, suffering a dam- 


aging clash with its cabin 
crew in the process, so that 
it would be able to withstand 
the economic downturn 
when it came. It has also cut 
expansion of its aircraft 
capacity, striking deals with 
manufacturers which will 
allow it to delay deliveries 
should the world economy 
deteriorate further. 

The strong pound and the 
Asian crisis helped produce 
a first quarter result which 
disappointed the City - even 
though operating profits 
rose 23.6 per cent to £173m. 
There were worrying ele- 
ments in the results: load 
factor, or aircraft occupancy, 
fell 2.6 percentage points to 
67.2 per cent. Passenger 
yields - the amount custom- 
ers pay for each kilometre 
travelled - fell 4.3 per cent 
because of sterling's 
strength and a fall in the 
proportion of first and busi- 
ness class passengers. 

A further concern was 
that BA’s first quarter fig- 
ures were flattered by a fall 
in its fuel bill to £l80m from 
£204m last year. Some ana- 
lysts worry that BA is vul- 
nerable to any finning of oil 
prices. 

There are other worries, 
such as whether BA will be 


allowed to receive cash for 
London take-off and landing 
slots it has to give up in 
return for its alliance with 
American. The UK Office of 
Fair Trading has recom- 
mended BA and American 
give up 267 weekly dots, but 
says it should be allowed to 
sell them to rivals. The 
European Commission says 
such sales are illegal and BA 
and American should give 
up their slots free. 

Following the first quarter 
results, analysts cut their 
full-year pre-tax profit fore- 
casts from about £700m to 
between £620m and £650m, 
compared with £58Qm last 
year. 

But this does not explain 
why the market has marked 
BA’s shares down so much 
more than those of other 
companies affected by the 
strong pound and recession 
worries. 

O ne of BA’s problems is 
that it has become a 
bellwether company. 
When the economy looks 
gloomy, investors punish the 
airline. “BA is viewed in the 
market as being a measure 
of general economic activ- 
ity.” said Richard Hannah, 
analyst at BT Alex Brown. 


“The classic one used to be 
ICL These days it’s airlines. 
It’s not just in the UK - in 
the US too.” 

But BA's defenders argue 
the market reaction is over- 
done. Its forward buying of 
fuel has protected it from an 
upturn in the fiiel price, they 
say. Its large international 
network means it can switch 
aircraft from weaker routes 
to strong ones. For example, 
a Boeing 747 which was fly- 
ing from London to Kuala 
Lumpur and then to Jakarta, 
has been rerouted to fly from 
Malaysia to Sydney instead. 

BA’s supporters argue its 
aircraft buying policy has 
been cautious, which will 
allow it to adjust to any 
sharp downturn in the world 
economy. Its recent order for 
up to 188 narrow-bodied Air- 
bus Industrie aircraft 
received wide publicity. Less 
attention was paid to the 
unusually small proportion 
of firm orders - only 59. The 
rest are options that BA can 
exercise in accordance with 
passenger demand. 

And although BA’s air- 
craft capacity will rise by 8 
per cent this year, the airline 
said the increase over the 
next two years will be far 
smaller. Between 1998 and 



Robert Ayling: to announce an expanded affiance 


Colin Beere 


2001. capacity wfll grow no 
more than 14 per cent - 
slightly below the expected 
increase in worldwide pas- 
senger numbers. 

BA also ordered 16 wide- 
bodied Boeing 777s. with 
options on a further 16. But 
five of the 777s replace exist- 
ing orders for bigger 747s. By 
introducing smaller aircraft, 
BA hopes to improve yields. 
With fewer seats, it is less 


likely to have to sell empty 
o nes c heaply. 

WTO all this persuade the 
market to take a kinder 
view? While BA has said 
little publicly, it has been 
arguing its case with institu- 
tions. The effect so for has 
been slight. During last 
week. BA’s shares rose 2lp 
from their low for the year 
of 390p. It is a start, but it is 
not quite take-off. 


US groups raid ‘cheap’ 
UK engineering sector 


By Peter Marsh 

A quarter of the UK's 
publicly listed engineering 
companies have been taken 
over or reclassified in the 
past two years. 

More than half the £456bn 
($7.S6bn) spent taking over 
UK publicly quoted engi- 
neering companies has been 
spent by US groups, accord- 
ing to an analysis by the 
Financial Times. Many engi- 
neering concerns are under 
pressure. Consolidation is 
taking place across the 
industry, aided by the low 
stock market valuations of 
UK-based engineering com- 
panies, which have made 
them appear cheap to over- 


seas groups. In the past two 
years, the sector has seen its 
combined share value fall by 
a third in relation to the rest 
of the UK stock market - 
with the strength of sterling 
reducing its competitive 
position. 

- In October 1996. there 
were 165 listed engineering 
companies. Since then. 41 
have left the sector or 
announced they will. 

Eight have been bought by 
US businesses, which have 
spent a total of £2.42bn. Of 
this, £1.5 bn has been spent 
on the biggest deal in the 
sector - the takeover of T&N 
by Federal Mogul. 

Four businesses have, been 
bought by foreign groups 


from Canada, France, 
Kuwait and Finland in deals 
totalling £304m. UK compa- 
nies have spent £1.48bn on 
10 businesses. 

Management buy-outs 
have accounted for six deals 
totalling rasim . while nine 
companies have moved into 
different sectors. Four com- 
panies have closed but bal- 
ancing the “shrinkage" are 
18 companies that have 
moved to an engineering 
classification giving a net 
reduction of 23 companies. 

Since the beginning of this 
month three businesses - 
David Brown. Rubicon and 
UPF - have been acquired 
by US companies or subject 
to a management buy-out 


Business Post awaits 
statement by ex-director 


By Robert Wright 

The suspended finance 
director of Business Post 
Group, the UK private postal 
company, who resigned on 
Friday, plans to respond this 
week to the company’s criti- 
cism Of h!m 

Business Post last week 
appeared to blame Torquil 
Montague-Johnstone, its 
suspended finance director, 
for last Wednesday’s profits 
warning which caused a 47 
per cent fall in the value of 
its shares. 

Business Post shares fell 
by 332%p to 365p when it 
warned that optimistic state- 
ments on trading prepared 
partly by Mr Montague- 


Johnstone - and given at the 
company’s annual general 
meeting in July - had been 
“unrealistic". 

Last week's events appear 
to have spurred the finance 
director to resign and to 
plan a statement for this 
week defending his actions. 

Mr Montague-Johs tone's 
departure was originally 
announced on August 13. 
when it was said he would 
be leaving within six 
months. The departure of 
the finance director followed 
the news that Michael Jones. 
Business Post's managing 
director, was planning to 
leave the group. Mr Jones’s 
departure was announced at 
the time of the controversial 


AGM trading statements. 

The news that the two 
executives were to leave 
brought the return of Busi- 
ness Post founders Michael 
and Peter Kane, to executive 
positions. The Kanes were 
unhappy with Mr Montague- 
Johnstone because he had 
exercised all his share 
options and sold his entire 
stake in Business Post in 
early July, realising £4.im. 
Mr Jones sold some shares 
at the same time. 

Business Post last night 
said it was not aware Mr 
Montague-Johnstone was 
planning a statement “Obvi- 
ously. we will wait to see 
what he has to say.” the 
company said. 


COMMENT 

TeteWest 


That TeleWest has timnelled 
its way Into the bright lights 
of the FTSE 100 must leave 
battle-scarred investors 
blinking. After an, it under- 
performed the market by 
some 75 per cent from its 
1994 flotation to January 
1998. At 169’Ap. the shares 
are still below their 182p flo- 
tation price. Acquisitions and 
issuing paper has got Tele- 
West its Footsie slot Admit- 
tedly, the company is getting 
its act together. The focus 
has shifted from digging up 
roads to wooing customers. 
Acquisitions should trim cen- 
tral costs, strengthen its 






CilioiA 



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to 

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negotiating band with suppliers and ex tend the brand over- ' 
bigger franchises. Investor confidence has also improved - 
alter more than a year of cashflow positive results. AT&T’s* 
recent takeover of TCI of the US Is a reminder that those 
sunken cables are highly valued by telecom companies* ’ 
because they provide direct acce s s to homes. 

Cable should be in pole position to become the mass-mar- > 
ket choice for customers in the digital age. Its bro a dba n d ’ 
technology is ideal for pumping internet services and inters 
active television into homes. But the best technology does'- 
not always vrtn the commercial day. More consolidation Is ■ 
probably needed before cable can square up to mighty Brit- " 
ish Telecommunications. Meanwhile, penetration rates for' 
TeleWest’s cable TV service still look unimpressive, while*, 
the proportion of subscribers disconnecting is still too higiv 
Cable has not cast off its potential to disappoint 

>: 

Water stocks V 

Utilities are safe havens in times of market turmoil. But one* ’ 
of these backwaters could prove treacherous in the next few 
months. Water shares have outperformed the market by-* 
more than 25 per cent since May. At current prices, how- 1 
ever, investors are possibly taking too san g ui n e a view of: 
regulatory risk, to just over a month the regulator will set I 
out a range of one-off price cuts for companies. The result.* 
could be ugly, especially if the government indicates a target * 
for future capital expenditure towards the lower end of the 
£6bn-£l5bn range. Lower capex strengthens the case for, 
tougher price cuts. Current share prices assume a benign u 
outcome and investors could be in for a shock if price cuts') 
are much above the average 8-10 per cent many expect. 


Astra satellite owner 
lifts revenues 13% 


« «*■ 


By Cathy Newman 


Socidtd Europdenne des 
Satellites, owner of the Astra 
satellites, reported a 13 per 
cent increase in revenues to 
LFrlObn (*280m) for the 
six months to the end of 
June. 

The company, which 
floated one sixth of its 
equity on the Luxembourg 


stock market earlier this'* 
year, said net income rose-, 
eight per cent to LFr3.6bn. 

Romain Bausch, director" 
general of SES. said the reve^ 
nue growth reflected the" 
introduction of its Astra 1G*- 
satellite. However, be added 
that costs had increased*’ 
partly because of marketing 
expenditure on new digital, 
broadcasting services. - 


I- 




m 









HAT BROUGHT THEM TOGETHER? SUPERIOR PERFORMANCE. 
WHAT KEEPS THEM TOGETHER? THE BANK OF NEW YORK. 

Along the historic hallways of Norwich Union, one of Britain’s largest insurance companies, modern 
ways of doing business are the order of the day. « A new way of managing assets, for instance, is raising 
new profits for Independent Financial Advisers like Anthony Skinner. ® That approach? Outsourcing the 
custody operations for the entire investment arm of the insurance giant. * The bank entrusted? The Bank 
of New York. # By having the Bank manage custody of assets, the investment arm of Norwich Union 
has been able to concentrate on its core business: creating higher investment returns. This in turn has 
helped Independent Financial Advisers like Anthony prosper by having a superior set of products to 
market. The result better service for all involved. ® Today, thousands of clients are using The Bank of 
New York to create, maintain, and enhance relationships with their investors. In the UK, Norwich 
Union Investment Management’s Daron Pearce and his client Anthony Skinner are just one example 





% ;* 




INVESTOR: Daron Pearce. 


INDEPENDENT FINANCIAL ADVISER: Anthony Skinner. 






&■'/ 


GLOBAL CUSTODY 


SECURITIES 





transfer agency services O GLOBAL CLEARANCE 




• S ^ 




(_>* 



FINANCIAL, TIMES MONDAY SEPTEMBER 21 1998 


COMPANIES & FINANCE 


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Ronson shares 
set to resume 
trading today 


Fiat chairman faces frenetic welcome Mi#* 


By David Btockwefl 

Shares in Ronson. the 
cigarette lighter distributor 
headed by the 71-jeardd US 
entrepreneur, Victor Kiam, 
are set to resume trading on 
the London Stock E xc han g e 
today. 

The move follows the 
approval oh Friday of the 
placing, and open offer of 
850.3m ordinary shares at lp 
by an extraordinary meeting 
of shareholders. The shares 
last traded in June, when 
they were suspended at 4%p 
after the group failed to 
announce results for 1997. 

, Albion Consortium Fund - 
the offshore fund in which 
Jack Lyons, the fi nan cier, 
has an interest - will be the 
biggest shareholder with just 
over 21 per cent of the ordi- 
nary shares and 100m con- 
vertible shares. Mr Kiam has 
invested Elm of his own 
money in 100m shares, and 
holds warrants for another 
large tranche. 

The group, advised by 
Charles Stanley, has raised 
more than £8m through the 
rescue refinancing package 
that was agreed last month 
after many delays and 
announced alongside the 
results. These showed that 
pre-tax losses deepened from 
£3.l7m to £LL5m last year on 
turnover down 17 per cent to 
£26.3m. 

■Hie audited accounts were 
qualified because of inade- 
quate information for the 
first half. The group also 
reported pre-tax losses for 
the six months to. July 4 
reduced from £5.27m to 
£3Ji5m on turnover of £10.4m 
(£13.4m). 

The proceeds from the refi- 
nancing package will, be 
used to reduce the debt of 
£5.3m incurred after the two 
years of losses. 

The restoration of the list- 
ing today marks the end of a 
remarkable year for Ronson. 
including an out-of-court set- 
tlement with its former chief 
executive. Howard Hodgson, 
the l9S0s stock-market star 
ousted in June 1997. 

Mr Kiam. who is famous 


Paolo Fresco must take the heat out:of global strategy during crisis, writes Paul Betts 






for liking the Remington 
electric shaver so much that 
he bought the company, 
entered the picture earlier 
this year as Mr Hodgson, 
who had built an empire 
from a family funeral par- 
lour, started work as chief 
executive of the rival ciga- 
rette lighter group. Colibri 
Corporation. 

Mr Kiam said In March 
that there were many simi- 
larities between Ronson and 
Remington, which was mak- 
ing losses when he led a 
highly^ leveraged manage- 
ment buy-out in 1979. Where 
Remington was fighting for 
market share with other 
shaver manufacturers as 
well as razor blades, Ronson 
is feeing other lighter com- 
panies, particularly the dis- 
posables. 

M I would like to build it to 
a company that gets the 
same respect as other com- 
panies that 1 am associated 
with,” he said. 

• Dealings in the shares of 
Glasgow Celtic Football Club 
wfll today move to the main 
market from Aim. The move 
is likely to help the club ben- 
efit from the recent rise in 
football stocks following the 
£623 m bid by British Sky 
Broadcasting for Manchester 
United. 

Celtic won the Scottish 
League’s premier division 
last season for the first time 
since 1968. ending a run of 
nine victories by local rivals. 
Rangers. However, the start 
of this season has seen 
Celtic facing some poor 
. results and a revolt by play- 
ers over bonus payments. 

Celtic shares. Issued at £84 
in September 1995, closed at 
£295 on Friday, making the 
dub (me of the junior mar- 
ket's best performers. The 
shares will be subdivided by 

100, maldng the likely open- 
ing price today 295p, with a 
total market capitalisation 
£85.6m. Celtic's chairman, 
Fergus McCann, who owns 
50.3 per cent of the shares, 
has announced be intends to 
leave before the end of the 
season and to sell his shares. 


Market . 
movers 

* 

P aolo Fresco will not, be 
shuffling to the carefree 
rhythm of a samba 
when be walks into his new 
office at Fiat 

The former number two at 
General Electric, .the US con- 
glomerate. is due to start 
working full-time next 
month as the chairman of 
Italy's largest manufacturing 
company. Hot on his desk 
will be the Brazilian crisis, 
which could severely dent 
company profits next year. 
Every thing seemed rosy at 

the beginning of the sum- 
mer. When Mr Fresco made 
his first public appearance at 
Fiat's annual meeting in 
June the company, stream- 
lined around its core auto- 
motive businesses and suc- 
cessfully engaged in a 
significant globalisation 
strategy, was flush with 
record profits and revenues. 

Barely three months later, 
senior executives are sound- 
ing the first alarm bells and 
analysts are busily revising 
downwards earlier profit 
estimates. 


Fiat had already said in 
June that profit margins in 
its core car business had 
tumbled in the first quarter, 
from 1 2 per cent to a mere 
0.1 per cent This was largely 
because of what was then 
seen as a seasonal slide In 
the Brazilian car market, 
where Fiat sold 509.000 
vehicles last year - 18,5 per 
cent of its total 1997 sales of 
2.74m vehicles. 

The situation in Brazil has 
continued to worsen. Since 
the beginning of the year, 
oew car sales tn Brazil have 
fallen 25 per cent In July, 
Flat reduced its dally Brazil- 
ian output from 2200 to 2100 
units a day. 

In Madrid for a car launch 
last week. Paolo Cantarella, 
Fiat chief executive, warned 
of difficult times ahead. 
Roberto Testore, head of the 
company’s car division, 
suggested that first-half 
results - due tomorrow - 
would also reflect the Latin 
American slump. 

Fiat, says Nick Snee, 
motor industry analyst at 
J.P. Morgan Securities, is 
paying the short-term price 
of its globalisation. “Fiat has 
long had one of the most 
convincing internationalisa- 
tion strategies of any car 


producer," he says. “Unfor- 
tunately, while Fiat’s global- 
isation programme should be 
seen as a virtue in the long 
run. it does leave the group 
more exposed to short-term 
problems in the emerging 
regions than companies 
which have been less suc- 
cessful in diversifying inter- 
nationally, such as the 
French volume producers.” 

Both Mr Cantarella and 
Mr Testore have in recent 
weeks continued to empha- 
sise the company’s long-term 
commitment to the interna- 
tionalisation strategy it has 
crafted during the last 
decade. Fiat will proceed 
with its $800m joint venture 
to build up to 150,000 cars a 
year in Russia. It remains 
committed to Brazil and 
Argentina, as well as Poland, 
Turkey, India »nrt China. 

The challenge for Mr 
Fresco will not so much be. 
as many had assumed a few 
months ago, to international- 
ise even further, but to 
implement the global strat- 
egy devised by his predeces- 
sors at a time when emerg- 
ing markets are in crisis. 

To make matters worse. 
Fiat is coming under pres- 
sure on other fronts. Us New 
Holland farm machinery 


BDO Stoy Hayward equity 
partners’ earnings soar 


By Jbn KeBy, 

Accountancy Correspondent 

BDO Stoy Hayward, the 
UK’s seventh largest accoun- 
tancy firm, will today 
announce a 2S.8 per cent rise 

in the average earning s of its 
equity par tn ers to £130.000, 
after a 14.7 per cent increase 
in fee income to £i22m. 

The firm said its success 
was due to a strategy differ- 
ent from that of the global 
Big Five firms which domi- 
nate the professional ser- 
vices sector and are restruct- 
uring to serve global clients. 

BDO Stoy Hayward is one 
of a handful of UK partner- 
ships publishing "plc-style” 
annual results - and the 
only one giving as much 
detail in the so-called middle 


tier of large firms below the 
Big Five. 

Adrian Martin, manag in g 

partner, said the firm was 
concentrating on entrepre- 
neurial and growing busi- 
nesses. Fees from tax advice 
had jumped 31 per cent to 
£33m and corporate finance 
32 per cent to film. 

The partner earning s fig- 
ure is the key industry indi- 
cator closely watched In the 
sector and it amounts to 
ream - with about another 
£5m ploughed back into the 
business for investment 

Current projects include a 
national advertising cam- 
paign and new 28m IT frame- 
work. At March 31 the aver- 
age level of investment In 
the firm by an equity part- 
ner was up 6 per cent to 


£141.000. The firm had taken 
the decision to retreat from 
“project-led” management 
consultancy - the main 
growth areas being devel- 
oped by the Big Five firms - 
and instead give clients sup- 
port and advice within a 
long-term relationship. 

Two MBOs had helped the 
firm concentrate on its core 
activities with its hotel con- 
sultants and public sector 
specialists spinning off - as 
well as the separation of its 
personal finance business 
from the main firm. 

Mr Martin said that the 
Big Five were leaving 
behind the entrepreneurial 
sector as their management 
structures became orien- 
tated to larger international 
clients. 


subsidiary, one of the com- 
pany’s most profitable divi- 
sions, which reported net 
earnings of LSlSbn ($490m) 
last year, is having to con- 
tend with recession in the 
agricultural sector that is 
expected -to lead to more 
intense price competition 
among equipment suppliers. 

Another problem is the 
decline in Italian car sales 
following the end of govern- 
ment incentives. 

Mr Testore said that, with- 
out new incentives, new car 
sales in Italy next year 
would fall to about l.8m. 
from 2.4m In 1997. Sales this 
year were expected to be 
around s.am. 

Nest month Fiat wifi lay- 
off temporarily 6.000 workers 
in Italy to adjust production 
to the lower demand. 

There are some bright 
spots. Gian carlo Boschetto. 
manag in g director of Iveco, 
said this month that Flat’s 
commercial vehicles subsid- 
iary would show sharply 
higher Drat-hatf profits. 

Fiat also saw its overall 
European car sales grow 2.7 
per cent in the first eight 
months of this year, giving it 
a market share of 11.4 per 
cent - second only to Ger- 
many’s Volkswagen. 







■» *8*-. £+*- 


Paolo Fresco: faces chatenge of hnptementing global strategy 


However, the simulta- 
neous weakening in both 
Italy and Brazil - the com- 
pany's two biggest markets 
- will add to the pressure on 
margins. J.P. Morgan 
expects a deterioration in 
second-half earnings signifi- 
cantly worse than market 
assumptions, with more dis- 
appointment next year. 

At its annual meeting in 
June. Fiat said it expected 


1998 pre-tax profits to be in 
line with last year’s L4.1S2bn 
but analysts no longer 
expect it can achieve flat 
profits this year. J.P. Mor- 
gan. by the far the most 
bearish, expects earnings per 
share to fell to L352 in 1998 
from L444 last year, drop- 
ping to L318 next year. 

After a 37-year career at 
GE, Mr Fresco is not walk- 
ing Into a cosy retirement. 







- ~rer§k4^$^. 


A li 
dissrd* 

today 
Hanoi 
his w 
spend 
in Vi. 
peacel 
The 
Hont, 
and o 
56-ye; 
annoi 


»** — * -35^ ! 






FINANCIAL TIMES MONDAY SEPT^Bpfedi ^g 

'•• r'' ' ' • 




COMPANIES & FINANCE 


CANADIAN TELECOMS NON-COMPETITION AGREEMENT ABANDONED 




Stentor groups agree 
loosening of alliance 


By Scott Morrison in Toronto 


The alliance formed by 
Canada's regional phone 
companies to face 
long-distance competition 
has been virtually disman- 
tled after members agreed 
they needed more flexibility 
to adapt to the rapidly 
changing C$i4bn (UStt.lGbn) 
national telecommunications 
market. 

The Stentor alliance said 
its 11 members would indi- 
vidually assume responsibil- 
ity for a wide range of func- 
tions currently performed by 
the alliance's staff on a col- 
lective basis. It is thought 
that the restructuring, 
which will do away with the 
understanding that members 
do not compete against each 
other in their regional mar- 
kets. will further increase 
competition in the Canadian 
market and enable the com- 
panies to meet specific cus- 
tomer needs better. 

As of January 1999. the 11 
former monopolies, which 
include Bell Canada, BC Tel 
and Telus, are to be respon- 
sible for product and service 
development, technology 
development, management 
of regulatory issues and 
national sales support. 

About 1,000 Stentor 
employees will be trans- 
ferred to member companies, 
while another 800 workers 
are to continue to operate 
and manage Canada's 
national network, comprised 
of regional networks owned 
by Stentor members. 

The decision to decentral- 
ise the alliance's functions 
effectively reduces Stentor 
to a vehicle through the. 
agreement of the group's 
exchange of traffic can be 
implemented. The compa- 
nies will become be free to 
expand beyond their 
regional boundaries. A deci- 
sion on the future of the alli- 
ance’s policy, advisory and 
government relations arm 
will be made in November. 

Colin Latham, chairman of 


Manila 
fights to 
save PAL 
from 
closure 




' . * 


Siemens orders surge after US ' deal # 





* *■$: •* i. 


Direct benefits of the merger will start to flow next year, wrttes^Christopher Par kes 



Change calls: more flexibility needed in C$l4bn market 


the Stentor alliance of chief 
executives, said the restruct- 
uring would enable the 
group’s members to better 
meet customers’ needs. “It’s 
time to move on. We had to 
change," he said. 

Previous alliances among 
the companies evolved into 
the Stentor format in 1992 to 
help them manage the tran- 
sition from a monopolist to a 
competitive market. Stentor 
acted as a marketing, lobby- 
ing and co-ordinating body 
fbr its members, but detrac- 
tors said the alliance had 
become too cumbersome to 
allow members to respond 
quickly to Canada's increas- 
ingly dynamic marketplace. 

Alternate long-distance 
providers, such as Sprint 
Canada and AT&T Canada, 
have been gaining market 
share by repeatedly lowering 
rates and providing better 
services through seamless 
national networks. And a 
number of other providers 
are scheduled to begin offer- 
ing local service in selected 
markets in early 1999. 

Bell Canada. Telus and BC 
TeL the three largest Stentor 
members, are seen as the 
most likely to thrive once 
they are free from the 


restrictive SteDtor structure, 
which was governed by con- 
sensus. The smaller compa- 
nies will continue to serve 
their local markets and pos- 
sibly seek out niche markets 
on a national scale. 

“Every Stentor company 
will be much more focused, 
responsive and agile.'’ said 
Winfried Freuhauf. a tele- 
coms analyst at a Toronto 
brokerage. 

Stentor' s fate was sealed 
earlier this year when Telus, 
the Alberta phone company, 
engaged in talks to form a 
business combination with 
AT&T Canada. Discussions 
broke down, but they served 
notice that Telus, among 
others, was no longer satis- 
fied to operate within the 
confines of the alliance. 

At least one Stentor mem- 
ber, however, acknowledged 
that it was likely that the 
new arrangement was a 
“band-aid" to hold together 
the alliance temporarily. 
Changes in the market and 
the likelihood of future 
mergers and acquisitions 
meant the group’s members 
would increasingly view 
each other in a competitive 
light rather than as partners 
in a co-operative alliance. 


The Philippine government 

said yesterday that it was 
making every effort to save 
Philippine Airlines, which 
has announced It will shut 
up shop next week, reports 
Reuters in Manila. 

“With two days to go 
before Philippine Airlines 
closes down. President 
Joseph Estrada Is still trying 
to get the airline's manage- 
ment and labour to agree to 
a settlement that can keep 
the airling in the air,” said a 
spokesman for the presiden- 
tial palace. 

“The president is 
exhausting all efforts to 
arrive at a middle ground." 
he added. 

Asia's oldest national 
airline has said that it will 
cease operations after 57 
years at midnight on 
Wednesday, pointing to 
enormous losses and 
protracted disputes with its 
pilots, flight attendants and 
ground crew unions. 

PAL took the decision 
after its ground crew union 
reversed its earlier accep- 
tance of the management’s 
offer for employees to own a 
20 per cent stake in the air- 
line in exchange for suspend- 
ing labour bargainings for 10 
years. 

The union proposed a five- 
year suspension. 

PAL's creditors and 
potential investors have set 
industrial peace as a 
condition for rehabilitating 
the airline. 

A three-week pilots’ strike 
in June dealt PAL a heavy 
financial blow, forcing the 
airline to seek a 
moratorium on its $2bn 
debt 

President Estrada has said 
he will meet management 
and tbe unions today to try 
to work out a compromise. 
However, there is no 
indication that such 
a meeting has been sched- 
uled. 


A dolf Hfltfl is learning to 
play golf. Quick to 
recognise the need for 
US-German cultural cohe- 
sion following the August l 
completion of tbe purchase 
of Westinghouse’s electricity 
generation arm, the presi- 
dent of EWU, Siemens’ 
power plant division, has 
taken up the favourite gamp 
of US business. 

However, the commercial 
benefits of the merger have 
been even quicker to mani- 
fest themselves in a surge of 
orders that threatens to 
swamp the US factories of 
Siemens Westinghouse 
Power Corporation. 

Although the Asian crisis 
has obliged the Siemens 
group to reduce nest year's 
sales expectations in the 
region by up to 30 per cent, 
this has been more than off- 
set by rapid growth in the 
US and Latin America, says 
Randy Zwira, president of 
the new company. 

Chinese demand was still 
stable. Mr Hfittl said, and 
pointed out that despite the 
economic disruption, no 
orders from elsewhere in 
Asia had yet been cancelled. 

As a result, SWPCs gas 
turbine production sched- 
ules are almost full for the 
next two years or more, and 
with many US buyers press- 
ing for installation in t-imp 
for the summer peaks of 1998 
and 2000, customers outside 
the US may find they have 
to wait longer than usual for 
deliveries, he said during a 
meeting of the World Energy 
Congress in Houston. 


In the past four months, 
the new company, which 
represents the group’s fossil 
power interests in the 
Americas, has contracted to 
build 41 gas turbines, worth 
more than sibn, and It 
expects aggregate growth in 
new US orders to continue 
well above recent levels for 


on the physical assets that 
are necessary to Back-stop 
these transactions^ - Mr 
Httttl said 1 

Although growth else- 
where will not be as vigor- 
ous as in the UiS, he forecast 
that worldwide demand for 
all types of power plant 
would, continue to increase 





Although growth elsewhere will not be 


as vigorous as in the US, worldwide 
demand for all types of power plant 


are expected to continue to grow for 
the next decade, with rises of about 


20 per cent a year in generating 
capacity up to the end of 2002. 


at least the next two years. 
“Our manufacturing capac- 
ity is fall until well into 
2(K>1,” Mr Zwim said. 

The Twain reasons for the 
rise In orders relate to weak- 
nesses in the Increasingly 
deregulated US power mar- 
ket which this summer saw 
spot prices rise as high as 
$7,000 per megawatt hour as 
the robust economy 
stretched existing generating 
capacity. The US summer 
peak load was 5 per cent 
higher than last year. 

“We saw a number of com- 
panies that had entered the 
energy trading business 
stumble badly . . . and 
there was a renewed focus 


for the next decade, with 
rises of about 20 per cent a 
year in terms of generating 
capacity through to the end 

of 2002. . 


T he more direct benefits 
of the merger completed 
on August 1. such as tbe 
cost savings expected from, 
restructuring and workforce 
reduction, will probably 
start to flow next year, 
according to Mr Hfittl. 

Although he described the 
companies as “a perfect 
match” with few overlaps in 
production - Westinghouse 
Is strongest in markets with 
a grid frequency of 60 Hertz 
and Siemens specialises in 


50 Hz equipment - he prom- 
ised “very significant cost 
improvement’’. 

“The earliest effects can be 
expected in our purchasing 
sector, followed by the reor- 
ganisation of our global 
manufacturing and supply 
management network,” he 
said. And all changes would 
be based on the basis of 
“best practices”, regardless 
of whether they o ri gi n a ted 
In the US or Germany. 

Set on avoiding the cul- 
tural conflicts comparable to 
those which dogged conser- 
vative Siemens' fumbled 
takeover of the entrepre- 
neurial Nixdorf software 
business into its information 
technology hardware busi- 
ness, Mr Httttl said he had 
established a “ground rule" 
that SWPC would be an 
American company. 

“This is one of our big 
issues " he said, and external 
consultants would be hired 
to offer expert advice. “To 
some extent it depends on 
people, and we would like to 
minimise our mistakes.” 

Mr Zwim appeared to har- 
bour few concerns. “Very 
early on they made it very 
dear we'd, be treated like a 
merger rather than an acqui- 
sition. We don't believe 
we’ve been taken over, we 
feel we have been saved,” he 
said. 

Even so. he added, he 
would have felt even more 
comfortable had the merger 
between Daimler-Benz and 
Chrysler been completed a 
year, ago: “Then we could 
learn from their mistakes.” 


Oki extends holidays to cut costs 


By Alexandra Harney hi Tokyo 


Old Electric said it would 
send workers at two semi- 
conductor plants home for 
extended holidays in an 
attempt to bring its loss- 
making chip unit back into 
the black. 

Oki, which accounts for 
less than 1 per cent of the 
memory market, said it 


plans to send employees at 
its Miyazaki and Miyagi 
plants home fbr 10 days this 
year with a 10 per cent sal- 
ary cut 

The two plants, which are 
located in northern and 
southern Japan, employ 
about 2,800 workers and 
manufacture 1-megabyte. 
4-megabyte, 16-megabyte and 
64-megabyte dynamic access 


random memory (D-Ram) 
chips. 

The company has already 
completed its first round of 
temporary work stoppages. 
Earlier this month, 600 
employees at the Miyazaki 
plant were sent home for 
three days. The group 
declined to say how much it 
expected to reduce expenses 
as a result of the move. 


Oki, which has one other 
chip factory in Thailand, 
said it was considering fur- 
ther cutbacks in its semicon- 
ductor business. Last year, 
tbe group fell into the red 
with Y8.1bn ($6lm) in net 
losses on sales of- Y764Rbn, 
up 4.4 per cent against the 
year before. The group hopes 
to return to profitability in 
the year ending in March. 



Financial Times Surveys 


VALEO HALF YEAR RESULTS 

** ■ Net income up by 13% 

Launch of the integration of ITT Electrical Systems 


V aleo's Board of Directors meeting on September 15th 1398. closed the Group's consolidated accounts 
for the first half of.l 998. 


+ 11 . 1 % 


Mexico 


Consolidated accounts 

(li FT> million) 


la half 1SS8 


1st half 1997 


°o change 
1993/1997 


+ 12.3% 


Gross margin 


Gross margin 
(in % sales) 
Operating income 
(in 9 a sales) 

Net income 
[m% sales) 
Cashflow 

Capital expenditures 


Operating 


+ 14.4% 


Tuesday October 6 


+ 13.0?« 


+ 10.4 9 a 
-35% 


Net income 


+ 13.0% 


At June 30th 1993 


A f December 3 1st 1397 


Shareholders' equity 
Net indebtedness 
Debt-to-equrty ratio (in “■«) 


Outlook 


For further information please contact: 


I The 1 1.1% rise in Valeo's consolidated sales 
in the first half 1998 includes 8.4% generated 
through internal growth, 1 .9% related to the 
extension of the reporting entity and 0.8% 
to net exchange rate variations. It does not 
therefore take into account the recent 
acquisition of ITT Electrical Systems which 
will be consolidated as from October 1st. 
I Sales grew by 9% in Europe and 18% outside 
Europe, that is an increase significantly 
greater than automotive output. 

I Operating income increased more rapidly 
than sales. 

I Net income amounted to FFt 836 million, up 
by 13%. 

I Research & Development expenses rose by 
15% and accounted fbr 6.3% of Valeo’s sales 
fbr the first half, against 6.1% during the first 
six months of 1997. This increase reflects 
Valeo's continuing efforts to offer automakers 
ever more innovative products and systems. 

1 Cash flow for the first half of 199S largely 
covered the Group's capital expenditures. 
At June 30th its debt-to-equity ratio was 
reduced to 9% against 1 1% at the end of 1997. 


The acquisition of the Electrical Systems 
business of ITT Industries 


The first six months of the year were marked 
by the signing of an agreement on June 25th 
to acquire the Electrical Systems business of 
ITT Industries. 

Electrical Systems achieved sales of 
US$ 1.9 billion in 1997 and employs 
13.000 people at 13 production sites and 
3 R & D centers. 


This acquisition strengthens the Group's core 
businesses and customer base and taxis Valeo 
as cne of the major players in the growth area of 
automotive electrical and electronic systems. 
The perfect fit with Electrical Systems will allow 
Valeo to : 

- gain world leadership m wiper systems and 
electric motors. 

-double sales in electronics through the 
integration of sizeable business in the area of 
switches and sensors. 

- strengthen its positions in engine cooling and 
climate comrol. 

-increase its technological expertise and 
innovation capability in' each of these areas. 
The Group has already started to implement 
plans to fully maximize the considerable 
synergies that exist between the acquired 
activities and those of Valea 
Valeo intends achieving this goal through the 
application of its 5 Core Strategies methods, the 
extension of a decentralized organization 
based on autonomous profit centers and the 
rationalization of industrial assets. 

This should result in significant operational 
savings and in more capital- effective 
management. 

The acquisition of Electrical Systems was 
financed for two thirds by the issue of shares 
with warrants attached. The operation raised 
FFr 6.6 billion in capital in line with the planned 
conditions. 

The consolidation of the activities of Electrical 
Systems is scheduled for the end of September. 
The financial structure of the Group following 
this acquisition and the capital increase will 
remain sound with a debt-to-equity ratio at 35%. 


The Group generat e s in excess 
of 90% of its sales in Western 
Europe and North America. 
These two regions are home to 
the world's main automotive 
market where demand remains 
strong. 

However, in response to the 
crisis in emerging countries 
and to the economic threat 
hanging over North America 
and Europe. Valeo is accelerat- 
ing the implementation of its 
rationalization plans. 

In 1998, foe Group's consoli- 
dated sales are expected to 
reach around FEr 40 billion, 
including the contribution of 
FFr 2.8 billion in- sales from 
Electrical Systems in foe 4fo 
quarter, against FFr 34 billion 
in 1997 (+ 18%). On an annual- 
ized basis, Valeo's sales would 
amount to FFY 43 billion. 
Through innovation and 
rigorous manage m e nt, Valeo 
intends pursuing its strategy 
of profitable growth at foe 
service of its shareholders. 


Felicia Kay in London 
Tel: +44 171 873 4199 
Fax: +44 171 873 4817 
email: felicia.kay@FT.com 


Janeth Harvey in New York 
Tel: +1 212 745 1346 
Fax: +1 212 355 9539 
email: janeth.harvey@FT.com 


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Tel: +01 525 682 8122 
Fax: +01 525 536 5690 


SHAREHOLDER 

INFORMATION 



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COMPANIES & FINANCE 


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POLYGRAM BID EC DECIS ION ON $10,4BN O FFER EXPECTED TODAY 

Seagram waits for go 


By AHca Rawsttjbra 

Seagram, the Canadian 
entertainment group, hopes 
today to. secure clearance 
from the European Commis- 
sion for -its S10.4bn bid for 
PolyGram, the Dutch music 
company^ 

If the hid, the largest in 
music industry history, is 
approved by Brussels, Sea- 
gram will then make its final 
filings with the US Securi- 
ties & Exchange - Commis- 
sion. It alms to complete the 
deal by early November. 

Seagram, which plans to 
cut annual-costs by up to 
WOQm by merging Poly- 
Gram's music interests with 
its Universal Music subsid- 
iary. has already Cleared the 
deal with US regulators, and 
does not expect any prob- 
lems in Europe. 

However, if the European 
Commission decides to 
mount a full-scale investiga- 
tion, Seagram would face a 
potentially damag in g delay. 
It cannot start to merge 
PolyGram and Universal 
until after completion, but is 



Alain L6vy: originally given $40m of discretionary funds 


already planning the merger 
process advised by Boston 
Consulting' Group (BCG). 

Seagram formed SO teams 
of PolyGram and Universal 
executives (drawn from the 
same disciplines or regions) 
to discuss the restructuring. 
They axe now malting their 
recommendations. 


Seagram is anxious to 
complete the acquisition on 
schedule by early November 
to prevent any further dete- 
rioration in the performance 
of PolyGram, where staff 
bave been destabilised by 
the forthcoming merger. ' 

PolyGram executives have 
also been disgruntled by the 


-ahead 


allocation of- a $40m 
discretionary fund originally 
given by Seagram to Alain 
Lfevy, PolyGram's former 
president 

The fond has been allo- 
cated by Jan Cook, finance 
director and acting chief 
executive. There have been 
complaints that . only 
S5m-S6m was given to US 
personnel, and a relatively 
small proportion went to 
record executives in Europe. 

Another raw erupted last 
week when Hits, a US music 
magazine, reported that BCG 
was to receive an SGOin con- 
sulting fee. A senior execu- 
tive described the report as 
“not inaccurate”. Seagram 
declined to comment 

Rival groups have been 
trying to exploit PolyGram's 
instability by courting its 
executives. Paul Dickson, 
head of PolyGram Australia, 
resigned last week to 
become cbief executive of 
News Corporation's Mush- 
room Records. Bertelsmann 
Music Group has hired four 
of PolyGram's European 
executives. 


CLT-Ufa improves I GFS A sale talks fail 


By Frederick Studemann 
in Berlin 

CLT-Ufa. Europe's biggest 
broadcasting group, expects 
to reach break-even in 1998 
after a first half in which net 
operating profits more than 
doubled to $86m oh sales up 
7.4 per cent to $L6bn. 

The Luxembourg-based 
company, which is owned by 
Audiofina of France and the 
German media groups 
Bertelsmann and WAZ, said 
the Improvement was driven 
by business in Germany and 
the Netherlands, where its 


radio and television stations 
increased market share, and 
the disposal of non- 
performing subsidiaries. 

In Germany CLT-Ufa owns 
RTL, the biggest commercial 
TV channel, and Haa Stjthtm 
in four other chann els. 

A turaround at other loss- 
making businesses, such as 
the RTL2 television channel 
in Germany and a similarly 
named radio station in 
France which reached 
break-even, also contributed 
to the improvement in the 
group’s performance in the 
first half. 


By Victor Haft* 
in Johannesburg 

Gold Fields of South Africa, 
the mining house to he dis- 
solved following the 
unbundling of its assets to 
shareholders, has said nego- 
tiations on the sale of its 
Northam Platinum min e to 
Anglo American Platinum 
Corporation had ended with- 
out a deal being concluded. 
Company sources said the 
two sides could not agree on 
a price. 

GFSA, which together 
with its subsidiaries New 


Wits and Vogelstruisbult 
Metal Holdings has an £L8 
per cent stake In Northam. 
said the mine would 
continue to operate as before 
for the time being. 

“No other offers for the 
platinum operation are 
currently being considered,” 
GFSA said. 

On Wednesday, GFSA 
shareholders approved the 
unbundling of the group’s 
main holdings in Gold Fields 
Ltd and Standard Bank 
Investment Coip. Those 
stakes are worth more than 
R7bn (SUbn). 


EMERGING MARKETS MEETING i AIMS TO RESOLVE CULTURAL j^ND_EC0N0MjC DIFFERENCES 

Africa considers integration 

By Joel Kibazo - '£&&& y* - ££ -\r.^ ■ ■ 'r;' Coast, Mali, Niger, Senega 

l-V ■ ;■ ‘ i ■-=■ and Togo, which togethei 


By Joel KBhzd 

International investors will 
be watching to see if the 
African. Stock . Exchanges 
Association -meeting,' which 
begins today in the flamhlan 
capital of Lusaka, lives up to 
its theme of “integration and 
growth of African -capital 
markets'*. 

The twin forces of eco- 
nomic liberalisation and a 
decline in overseas kid have 
seen governments 'from the 
Sudan to Malawi open stock 
markets in the last decade. 

While the trend for a more 
commercial environment has 
been welcomed by both 
donors and international 
investors, analysts say many 
sub-Saharan markets (exclu- 
ding South Africa) are too 
small to be viable and 
should be merged to func- 
tion on a regional basis. 

However a combination of 
national pride, competition 
for limited funds, different 
financial reporting systems 
and tax structures, and a 
lack 6T agreement on issues 
such as custody and settle- 
ment has so far prevented a 
move toward integration. 

Michael Power, at Baring 
Asset Management, says: 
“Although it is important to 
have a living, breathing 
stock exchange, the ■ argu- 
ments for regional markets 
are very clear. I would 
rather focus on a regional 
exchange where I can get 
cross-comparisons within 
sectors and across compa- 
nies which we can't do now 
because of bow small these 
markets are. They are lim- 
ited in terms of stocks, and 
thus liquidity.” 

Many point. to'- east Africa 
as an example of difficulties 
encountered by international 
investors. 

Although Kenya, Tanzania 
and Uganda signed the East 
African Cooperation treaty. 


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agreeing to harmonise their 
economies and eliminate 
barriers to trade, their 
respective equity markets 
have moved in different 
directions. 

Specialists on the region 
believe Kenya's Nairobi 
Stock Exchange, which 
started trading in 1954 and 
relaxed foreign investment 
rules in 1994, should have 
remained the market for all 
listed companies from the 
three countries. 

TYiwtrari , Uganda opened a 
stock market late last year, 
but the slow privatisation 
programme has ensured that 
not a single company has yet 
been listed. 

Investor sentiment was 
recently dented by a vote in 
Parliament to put the brakes 
on privatisation. 

Tanzania followed suit in 
April. While the move 
marked another step in the 
country's shift away from its 
socialist past, international 
investors remain disap- 
pointed and frastrated'at its 
refusal to embrace foreign 
investment. 

' Analysts point out that the 
p lanin g. of Tanzania Oxygen, 
the first .. listing on the 
bourse, was undersubscribed 
and left 13 per cent of the 
stock with underwriters. 


“In a country that is still 
poor, it is unlikely that the 
locals can absorb much 
stock," said one analyst 

However, Japheth Katto, 
chief executive ot Uganda’s 
Capital Markets Authority 
said: “We realise we have to 
do something and we have 
already started serious dis- 
' missions. The ministers have 
asked to see a timetable to 
deal with the issue of inte- 
gration. We are likely to 
start with cross-listing 
before we move further." 

Elizabeth Morissey of Klei- 
zban Internationa], the 
Washington-based emerging 
markets consultancy, said: 
“Integration is going to be 
an issue that keeps coming 
up, but 1 can't see a resolu- 
tion in the short term. These 
are countries that have not 
even started addressing 
issues such as different tax 
regimes, custody, access for 
foreigners, so I think inte- 
gration is some way off.” 

The new west African 
regional bourse, which 
opened last week in Abidjan, 
may serve as a model for 
other regions in Africa. 

With a market capitalisa- 
tion around the $1.5bn mark, 
the Bourse Regional e des 
Valeurs Mobilises will serve 
Benin, Burkina Faso. Ivory 


Coast, Mali. Niger, Senegal 
and Togo, which together 
with Guinea-Bissau form the 
West African Economic and 
Monetary Union. 

In the initial stages, the 
BRVM will operate under a 
provisional electronic trad- 
ing system, with national 
exchange oftfeng in member 
countries faxing in their 
orders. 

Eventually, all national 
offices will be linked to the 
automated bourse via a sat- 
ellite transmission system. 

Alexander Holcroft at 
Flemings said: “This kind of 
arrangement broadens the 
market and allows for criti- 
cal mass. Another benefit of 
this will be. going forward, 
the uniform trading custody 
and settlement across the 
region.” 

With the exception of Zim- 
babwe, where the industrials 
index has declined by 7&2 
per cent in dollar terms this 
year, mainly for domestic 
reasons, the region as a 
whole has remained attrac- 
tive to investors in spite of 
the downturn in emerging 
markets. 

While the IFC emerging 
markets index has fallen by 
around 37 per cent in dollar 
terms over the last year, 
markets such as Gh ana bave 
moved strongly ahead. 

That bourse has risen by 
80 per cent in dollar terms in 
the last year, while Bot- 
swana and Nigeria have also 
outperformed the IFCL 

Jonathan Garner, director 
of emerging markets strat- 
egy at Flemings said: “These 
markets are becoming more 
and more relevant because 
they are able to make posi- 
tive dollar returns. The Mid- 
dle East and Africa now 
accounts for around 12 per 
cent of emerging markets 
capitalisation, a ratio which 
has doubled in the last 
year." 


NEWS DIGEST 




Cemex revives bid for 
stake in Semen Gresik 

Cemex, the Mexican cement company, has renewed its 
bid for a stake in Indonesia’s largest cement factory even 
though it can now buy only a minority stake. 

Cemex bid 5114.6m, or 51.38 a share, for a 14 per cent 
state in Semen Gresik, a partially privatised cement com- 
pany. The government rejected an earlier bid by Cemex, 
also at $1.38 a share, for 35 per cent after It bowed to 
pubfic protests at two plants. As the government only 
holds 65 per cent Cemex would have been able to buy 16 
per cent on the market and obtain majority control if the 
sale had gone ahead as planned. Cemex sad it now 
aimed to buy at least 6 per cent on the market, giving h 20 
per cent Cemex still faces possible counterbids next 
week, however, from Holderbank, Heidelberger and 

Lafarge. 

Shares In Semen Gresik jumped from Rp7,150 to 
Rp7,425 yesterday in expectation of Cemex purchases on 
the exchange. Sander Thoenes, Jakarta 

ELECTRONIC TRADING 


CME launches new system 

The Chicago Mercantile Exchange is to begin trading 
tomorrow on Globex 2, its new electronic trading system, 
at the start of a link-up with Matif, the French derivatives 
exchange. 

The CME and Matif alliance follows an exchange of trad- 
ing technologies, which allows members of each market to 
trade the other’s products on a single system. Globex 2 is 
based on technology originally developed by Matif. Daily 
trading on the new system will begin after business ends 
on the CME's open outcry trading floor, and the exchange 
says Globex 2 wiA allow for almost 24-hour trading. 

The Chicago Board of Trade, the CME’s main US rival, 
also unveiled new technology yesterday with the launch of 
MarketPower, an interactive trading system for US treasury 
bonds. The CBOT said the new system would enable 
investors to cut costs by providing investors with instant 
access to prices and trading volumes in the US govern- 
ment bond market, the most liquid market of its type in 
the world. Vincent Boland 


INVESTMENT BANKING 


SSB recruits from rivals 

Salomon Smith Barney, the US Investment bank, has hired 
five people from rival securities houses in an effort to 
strengthen its corporate advisory and debt origination 
businesses for the UK and Ireland. 

In the mergers and acquisitions sector, Matthew P on- 
son by joins from Deutsche Bank as a director of the UK 
and Ireland coverage group headed by Anthony Nelson. 
Philip Keevil's European M&A team is adding Steven 
Fobel, formerly of ING Barings, as a director, and Anthony 
Parsons and David Smith, both from Deutsche, as vice 
presidents. Pippa Mason is leaving Warburg Dilion Read to 
Join Salomon's debt capital markets team as a vice presi- 
dent responsible for origination in the UK and Ireland. 

Clay Harris 


TELECOMMUNICATIONS 


Mannesmann lifts OliMan stake 

Mannesmann, the German conglomerate, has completed 
the second stage of its deal with Olivetti, the Italian tele- 
communications and office equipment group, by paying 
L641bn (5383m) for a further stake in OliMan, their tele- 
coms Joint venture. Olivetti said on Friday that Mannes- 
mann had bought a 12.5 per cent interest in OliMan, lifting 
its total holding to 37.5 per cent 
Mannesmann confirmed the planned acquisition last 
month, saying it hoped to increase its state by a further 
12.4 per cent by the end of February 1999, paying an 
additional Lfi55bn and taking its holding to 49.9 per cent 
Reuters, Mian 


RETAIL 


Mitsukoshi warns 

Mitsutoshi, Japan’s second largest department store oper- 
ator, has warned that its performance in the first half of 
this year would be much worse than expected. The group, 
which has been hit by the collapse in consumer demand in 
Japan, cut its earlier earnings forecasts In half, from Ylbn 
to Y450m (53.4m). This compares with losses of Y33.8bn 
in the same period the previous year. Sales would be 
Y342.8bn, down 7 per cent from the year before, the 
group said. 

The warning was in line with market expectations. On 
Friday, shares In the group were up 0.65 per cent or Y2 to 
Y312. Alexandra Harney, Tokyo 


SOFTWARE 


Hungarian group opens IT park 

Graphisoft, Hungary's largest home-grown software com- 
pany, has officially opened the first stage of a $30m, 7 
hectare Information technology park in Budapest 
Gabor Bqjar, Graphisoft chief executive, said the park, 
which already boasts Microsoft Hungary as one of its first 
tenants, will give start-up IT companies preferential rents 
to encourage Hungarian computer specialists to develop in 
their homeland rather than take their talents abroad. The 
company itself employs 150 people at its headquarters in 
the park. Kester Eddy, Budapest 



Imcresi Amount due m 
December 18. 199G per 

USD 1000 USD 14 06 
USD 10.000 USD M0 61 
USD WO.OCO USD 1.406 OS 

G Banque G£n£rale 
du Luxembourg 

Agent Bank 


Cayman Financial Brokerage House 


Forex, Futures, Options 
and Guaranteed Funds 

Telephone +1 34S 945 3100 
Website wwvK.cfbh.com. 
Facsimile +1 345 945 3199 


24 HRS GLOBAL OFFSHORE TRADING 


Financial Times Surveys 


FT Director 


Friday November 20 


For further information please contact: 

William MacLeod in London 
Tel: +44 17X 873 3699 
Fax: +44 171 873 4296 
email: wiIIiam.macIeod@FT.com 

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email: mark.cunnigton@FT.com 


FINANCIAL TIMES 

No FT, no comment. 















A li 
dissid* 
today 
Hanoi 
his a 
spend 
in Vi. 
peace! 

The 
Hoat. 
and a 
56-ye; 
annoc 
a gen 
more 



FINANCIAL TIMES MONDAY SEPTEMBER S 1998 


COMPANIES & FINANCE 


BHP cites 
Asian crisis 
as profits slip 


Ssangyong 
to focus 
on core 
operations 


INTERNATIONAL BONDS DISMAL MACROECONOMICS UNDERLIE UNPRECEDENTED BULL RUN 


■ 


JGB yields reach worldwide lows 


By Paul Abrahams In Tokyo 


By John Burton 
in Seoul 


By Russell Baker in Sydney 


BHP admitted that the Asian 
economic crisis was continu- 
ing to affect the Australian 
resources group’s profitabil- 
ity as it reported a 1.7 per 
cent drop in net profit to 
A$351m (US$2Q7m) for the 
three months to August. 

Ron McNeilly. chief oper- 
ating officer, said given mar- 
ket conditions, the August 
quarter was “a solid one 
which reflects encouraging 
progress with our business 
improvement plans”. How- 
ever. he warned: “I foresee 
difficult market conditions 
for some time to come-” 

The first-quarter result 
was boosted by AjLOOm of 
profits from asset sales, 
including a AS46m gain on 
the sale of two-thirds of the 
group’s stake in Orbital 
Engine Corp. 

BHP said its steel products 
operations in Asia had prob- 
lems with domestic sales and 
were redirecting sales to 
export markets. 

The company's steel activi- 
ties in Australia and New 
Zealand have also reduced 
their exposure to Asian mar- 
kets from about two-thirds 
to one-third of total exports. 

The Asian crisis was also 
partly blamed for weak 
world copper, oil and other 


commodity prices, which 
have cut into BHP’s profits. 
However low US dollar com- 
modity prices were offset to 
some extent by the Austra- 
lian dollar's weakness 
against the US currency. 

BHP said its world miner- 
als division, which saw a 
ASTOm loss, was hit by con- 
tinuing high operating costs 
at the Hartley platinum 
mine in Zimbabwe and the 
Beenup mineral sands opera- 
tion in Western Australia. 

The petroleum division 
was affected by significantly 
lower crude-oil prices and 
lower profits from sale of 
assets, but this was partly 
offset by increased sales vol- 
umes and lower exploration 
expenditure. 

BHP's copper arm was 
given a boost by the resump- 
tion of operations at Ok Tedi 
Id Papua New Guinea, but 
this was countered by lower 
average copper prices. 

BHP said: "'Benefits from 
cost reduction initiatives 
continue to be reflected in 
lower production and over- 
head costs, particularly at 
the coal, ferrous minerals 
and copper divisions.’* The 
group cut costs by A$150m 
during the quarter. 

The company maintained 
Its quarterly dividend at 25 
cents a share. 1 


Merrill offers 
hindsight bonds 


By James Mackintosh 


A new type of Investment 
bond that carries out asset 
allocation between European 
markets with the benefit of 
hindsight could become com- 
mon as Merrill Lynch pre- 
pares to lend the weight of 
its name to a DMlbn ($59lm> 
issue. 

Merrill was beaten to the 
markets last year by John- 
son Fry, a tiny UK fund 
manager, which raised sev- 
eral million pounds for its 
Dublin-based 2020 Hindsight 
fund, but Merrill expects to 
raise far more money, helped 
by its strong distribution 
network and blue-chip name. 

The bonds, part of Mer- 
rill's Euro-certificates range, 
will be sold primarily to rich 
private invertors via private 
banks and up-market finan- 
cial advisers. 

Onno Vries man. assistant 
vice-president, product 
development, said the bonds 
would help investors over- 
come uncertainty in Euro- 
pean markets. He expected 
to sell DM300ra within 
weeks, with up to DMlbn 
taken by early next year. 


The bonds, which last for 
seven years, allocate the ini- 
tial investment between 
eight European stock mar- 
kets - including the UK - 
according to each market's 
performance, with the best 
performer gaining 16 per 
cent of the investment and 
the worst 9 per cent. 

Returns are then given 
according to market indices, 
although investors sacrifice 
dividends. 

The bonds are denomi- 
nated in Deutsche marks 
and will be listed on the 
Amsterdam. Frankfurt and 
Luxembourg stock 
exchanges as well as two 
smaller German markets. 

Graham Hooper, invest- 
ment director of Chase de 
Vere. the UK financial 
adviser, said: “It is a concept 
that has been bumped 
around the market for a , 
while, but it has not had the 
credibility of a name like | 
Merrill behind it” 

“I think now we win see 
variations or it [from other 
investment banks] - I am 
surprised no-one apart from 
Johnson Fry has done ft 
yet ” Mr Hooper said. 


The Ssangyong group, one of 
South Korea's leading con- 
glomerates, is to focus on its 
core cement business after 
deciding to sell its oil 
refining division and 
following the recent acquisi- 
tion of its securities subsid- 
iary by a US investment 
company. 

Ssangyong is disposing of 
most of its assets to pay 
debts of nearly Won3.000bn 
($2.16bn) that were amassed 
during an ill-fated attempt to 
manufacture cars. 

The group has decided to 
sell its 2S.4 per cent stake In 
Ssangyong Oil Refining for 
an estimated $50Cm, possibly 
to the Saudi state-run oil 
company Aramco, which 
already owns a 35 per cent 
stake. 

Ssangyong Investment & 
Securities last week became 
the first Korean securities 
firm to be sold to a foreign 
investor, in a deal with 
Hambrecht & Quist of the 
US. 

Ssangyong decided to sell 
its securities unit. Korea's 
fifth largest brokerage 
house, after it lost 
Won263.5bn in the last fiscal 
year owing to the poor state 
of the Seoul bourse and an 
ill-timed expansion of its 
business operations. 

H&Q. a San Francisco- 
based venture capital firm, 
will acquire a controlling 
stake of 28.1 per cent in the 
business for an undisclosed 
sum. 

It will also make a 9110m 
capital investment by 
buying rights issues and 
convertible bonds to be 
issued by Ssangyong 
Securities to raise its capital 
adequacy ratio and avoid a 
threatened closure by the 
government for its poor 
finan cial status. 

The Ssangyong group 
encountered financial prob- 
lems because of heavy 
investments in the mid-1990s 
to produce cars in coopera- 
tion with Mercedes Benz. 
The car division. Ssangyong 
Motors, was sold to Daewoo 
last December, although 
Ssangyong was forced to 
assume half of its debts of 
Won3.400bn. 

In an effort to raise capital 
of at least Slbn, Ssangyong 
has also sold its paper unit, 
to Procter & Gamble, a Calif- 
ornia hotel, three shipping 
vessels, and the Seoul head- 
quarters of Ssangyong Secu- 
rities. 

Ssangyong plans to cut its 
high debt burden in half to 
two times equity by the end 
of 1999. 

Ssangyong will concen- 
trate on its main cement 
operations, which includes 
the world’s largest cement 
plant with an annual 
production capacity of llm 
tonnes. 


Japan's benchmark 
government bond is being 
changed tomorrow. The 
182nd bond was getting too 
long in the tooth to be called 
a long-bond. With only seven 
years left before redemption, 
its yield had fallen at the 
end of last week to an aston- 
ishing 0.675 per cent - the 
lowest in the world. 

However, it is not that this 
miserly return was merely 
the product of its position on 
I the yield curve. Its replace- 
I ment, the 203rd 10-year bond 
1 issued in May Is yielding 
Just 0.83 per cent Only a few 
months ago the 182nd was 
offering 1.4 per cent and only 
1 the most pessimistic com- 
mentators believed it would 
fall to 1 per cent 
The reasons for this 
unprecedented bull-run in 
the bond market are not 
hard to fathom. Underlying 
everything is the dismal 
macroeconomic environ- 
ment 

The Japanese economy 
has just completed Its third 
quarter of negative growth. 
Broker Warburg Dillon Read 
has just cut its GDP fore- 
casts, predicting contrac- 
tions for the next three cal- 
endar years of 1.7 per cent 
12 per cent and 02 per cent 
Susumu Kato, chief econo- 
mist in Tokyo for Barclays 


Capital, believes the outlook 
for the Japanese economy is 
bleak. “There may not be 
self-sustaining growth for 
three years, possibly even 
five," he says. 

With such poor economic 
prospects, consumer and 
wholesale prices are set to 
fall - a positive phenomenon 
for bonds. The deflationary 
pressures are huge. The 2.1 
per cent a year decline in 
wholesale prices is feeding 
through to the consumer 
level. HSBC is predicting the 
consumer price index will 
dip this quarter and decline 
for the five succeeding quar- 
ters - effectively into the 
new millennium. 

The recession means gov- 
ernment bonds - even at 
yields of 0.675 per cent or 
0.83 per cent - present an 
attractive investment for 
those that have to own Japa- 
nese assets. 

This month's effort by the 
government’s to kick-start 
the economy was to cut the 
over-night call rate to just 
0.25 per cent 

As for equities, their dis- 
mal yield of Just under 1 per 
cent scarcely compensates 
for the continuing falls in 
their value. Last week the 
Nikkei 225 hit a 12-year low. 
The return on the stock mar- 
ket is clearly negative. 

The attraction of govern- 
ment bonds is enhanced by 


the supply/demand balance. 
Last year’s disastrous fiscal 
tightening affected the pri- 
mary supply of bonds. And 
the Bank of Japan’s halting 
steps towards monetisation 
is leading it to buy up bonds 
in the secondary market. 

The financial institutions 
that sell to the BoJ then just 
buy more in the primary 
market. The demand side ts 
boosted by the fact that 
these are, after all, zero-risk 
assets, an unusual commod- 
ity in late- twentieth-century 
Japan. 

Despite all these factors 
buoying the market, there is 
a real danger that Japanese 
government bonds could 
crash, warns Mr Kato at Bar- 
clays Capital. The biggest 
threat is a global crash, 
beginning in Latin America 
and feeding through to the 
US and global markets. 

Other threats include the 
government having to 
increase the supply of bonds 
because it is running out of 
money. Although the sales 
tax was raised last year from 
3 per cent to 5 per cent, gov- 
ernment revenues are falling 
because of the recession. 

Last week, Tokyo said its 
tax take had fallen 8.6 per 
cent below target, a figure 
likely to be repeated at 
national level. The final 
threat, according to Mr Kato, 
is that the economy begins. 


10-year bendxtafffchoi 


Percent-^ 




J 





Ab _ UK 

■ ' sennany 
— — Franca 




rather unexpectedly, to 
grow, but this, he says, is 
the least likely. 

However, the most compel- 
ling reason for the market to 
remain at these heady levels 
is that the government can- 
not afford to let it fall. 
Japan's beleaguered banks 
are among the biggest inves- 
tors in the market. Battered 
by losses on their holdings 
in the stock market, the 
banks are also suffering 
from massive bad loans. 

The collapse in the value 
of the collateral for these 
loans - mainly property - 


combined with the desperate 
cas h-flow position of many 
of their customers has had a 
devastating effect on their 
capital base. 

Were the bond market to 
collapse It could lead to a 
number of bank failures, 
which at the very least 
would exacerbate the credit 
crunch, and at worst could 
cause a systemic failure. The 
social, political and eco- 
nomic consequences of a 
bond crash are so unimagin- 
able that, if it remains in its 
power, the government will 
not let it happen. 


Japanese metals group 
files for bankruptcy 


Swiss divided over 
sale of gold reserves 





I'iirnin®! 

slwlsti’r 1 


By Alexandra Harney in Tokyo 


Yahagi, the Japanese metals 
group that expanded into 
software and temporary 
staffing, has filed for bank- 
ruptcy in a local district 
court with an estimated 
Y3.5hn ($26.4m) in liabilities. 

Yahagi is the fifth listed 
Japanese company to go 
bankrupt this year, accord- 
ing to Teikbku Data Bank, a 
research group. 

Last month, Okura. one of 
Japan's oldest trading 
houses, filed for bankruptcy, 
following the collapse of 
Showa Plastics, a manufac- 


turer of dashboards and tele- 
vision cases, and Mita Indus- 
trial, a photocopier maker. 

Yahagi, which was 
founded in 1937 as a metals 
trader, ran into funding diffi- 
culties this year after 
attempting to move into 
multimedia and internet 
telephone services. 

Last year, the group tried 
to raise new capital through 
a third-party share issue to 
Kyokuichi. a small multime- 
dia and clothing company, 
and acquired the temporary 
staffing business through a 
deal with Pasona, Japan's 
largest staffing group. 


However, the company 
met further funding trou- 
bles, prompting two execu- 
tives to resign at a board 
meeting earlier this mnnth- 

Tbe group, which employs 
66 people, has ties with the 
Industrial Bank of Japan, 
which holds 4 J per cent of 
the company. It could not be 
reached for comment. 

The announcement was 
made after the close of trad- 
ing on Friday. Shares in 
Yahagi ended up Y5 at Y29. 
The stock, which will be 
delisted next. moDth. has j 
fallen 93 per cent from a 1998 
high of Y440 in March. 


By Pfifllp Coggan, 
Markets Editor 


Swiss public opinion is 
divided over whether the 
central bank should sell part 
of its gold reserves, accord- 
ing to a new poll. 

Draft legislation was 
approved by the Swiss fed- 
eral government in May. 
which would allow the bank 
to revalue and gradually sell 
1,300 tonnes of gold, about 
half its reserves. The plan 
would have to be approved 
in a referendum. 

. . The poll, conducted by the 
Swiss organisation GfS on 
behalf of the World Gold 


council, found 42 per cent 
agreed with the idea that the 
Swiss reserves should be 
sold and 40 per cent dis- 
agreed. The remaining 18 per 
cent were “Don’t Knows". 

But the poll also found 
that 69 per cent of the pop- 
ulation thought it was 
"rather important" for Swit- 
zerland to have substantial 
gold reserves and only 25 per 
cent thought the current 
level was excessive. 

A substantial gold sale by 
the Swiss Central Bank 
would have a depressing 
effect on the bullion price, 
which remains well below 
half its level in 1980. 


-=*- L* 

s 

> 


-- 

: MM*-* 



XT.-. <4 


---A**; 

- 


Fuji Electric warns of first-half deficit 


Fuji Electric has sharply 
revised downward its sales 
and profit forecast for the 12 
months to March 31. 1999 
and Warned that, for the first 
time in 22 years, ft would 
report a first-half loss, 
reports Dow Jones in Tokyo. 

The Japanese electrical 
machinery maker also said it 
would axe 11} per cent of the 
workforce, pass its interim 
dividend and that it was 
undecided on the year-end 
pay-ouL 

The group said an anaemic 


domestic economy and the 
economic unrest in Asia had 
forced Japanese companies 
to hold back capital outlays 
on new plant and 
equipment, thus leading to 
weakness in prices for Fuji's 
industrial machinery. 

The sluggish Asian 
economy has also curbed the 
company's exports to the 
region. 

Fuji added that the slump 
In the personal computer 
market had helped to worsen 
its businesses related to 


magnetic memory products. 

Fuji is now predicting an 
unconsolidated pre-tax profit 
of Y3bn ($23m) for the fiill 
fiscal year, well below its 
previous forecast of Yl0.5bn. 

Net profit is now pegged at 
Y2bn. against the previously 
expected Y6bn. 

Sales are now expected to 
be Y550bn, compared with 
the Y58flbn it projected in 
May. 

For the first half to Sep- 
tember 30. Fuji said pretax 
losses would be Ylbn. net 


losses Y500m and sales 
Y220bn. 

The company added that it 
would not be able to avoid 
revising its sales and earn- 
ings outlook on a consoli- 
dated basis for this fiscal 
year, saying it was currently 
compiling new earnings esti- 
mates. 

Given the poor business 
performance. Fuji said it 
would restructure, partly 
through a reduction in staff. 
On a consolidated basis, it 
would cut its workforce by 


about 10 per cent to 30,000 by 
March 2000. 

On a parent basis, it will 
reduce workers by 1.000 to 
13,000 by March 2000, in part 
through natural attrition 
and a voluntary retirement 
programme. 

The company will also 
freeze new capital invest- 
ment in principle for the 
time being. 

It will also reduce spend- 
ing on research and develop- 
ment to Y32bn from the 
Y33.7bn initially planned. 


* « 






FT GUIDE TO WORLD CURRENCIES 



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J ON 


■ ■ 


FINANCIAL TIMES 
■Rnurtt 



FT WORLD ACCOUNTING 
REPORT 


FT World Accounting Report is a monthly newsletter 
providing an essential first read on international financial 
reporting changes and their practical implications for vou. 


FT World Accounting Report provides you with: 


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FINANCIAL TIMES MONDAY SEPTEMBER 21 1998 


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MARKETS 



WEEK 


...we're there. 


September 21 - September 27 



NEW YORK 


By Richard Waters 


Benchmark ytetoenree 

(%T 

— IMAMS 

Q-b5- 


Each time Treasury bond 
prices seem to get ahead of 
themselves, yields resume 
their march lower. Last 
week ended with a record 
low yield on the long bond, 
at 5.15 per cent - despite a 
reversal when hopes for a 
coordinated cut In global 
interest rates were dashed. 
Two-year notes also 
shrugged off the 
disappointment and the 
yield fell to 4.68 per cent 

With the Fed due to d e rid e 
a week from tomorrow on 
whether or not to cut 
interest rates, there is likely 
to be little in this week's 
flow of domestic economic 
data to tip the decision one 
way or the other. 

Thursday's release of 
durable goods orders for 
August is expected to show a 
moderate increase of 0.5 per 
cent, slower than the sharp 
rise in July. Friday should 
bring evidence of continued 
strength in personal incomes 
(up 0.5 per cent in August) 
and consumption (up 0.6 per 
pbiiU 



10 years 20 30 ..! 

» ■*»***« 

******** ija* ma canon 

Dow Jones Industrial Average 


aim. 



7800 


If 14 15 IB 17 IB 

sepisaa 


More Important in the 
Fed's deliberations could be 
the direction of financial 
markets. A rally in the stock 
market would make ft 
difficult for the Fed to ease. 
Paradoxically, if hopes for a 
cut fade this week, share 
prices could stumble - 
malting it more likely that 
rates would be cut. 


LONDON 


By Steve Thompson 


Benchmark yfeWcwve 

(*r 

7.75 


After last wee k's tur bulence, 
which saw the FTSE 100 
Index drop below the level at 
which it kicked off the year. 
Investors will be watching 
carefully for evidence of 
more profits warnings. 

A mixture of warnings 
from leading stocks caused 
mur.ii of the turmoil hi 
London's stock market last 
week. Alcatel's results and 
the accompanying warning 
of sliding profits triggered 
alarm bdls across all the big 
telecoms equipment 
manufacturers, not least 
GEC- That news, plus profit 
alerts from Shell, Bass and 
RMC, induced extreme 
caution. 

In a rather sparse week for 
economic news the CBTs 
September survey of 
industrial trends will be 
scrutinised for more 
evidence of the effects of the 
emerging markets' crisis, 
and the strength of sterling, 
on UK manufacturing. 

Three FTSE 100 
constituents report this 
week, Tesco, Sun Life and 


— 18/3/1998. 
=• Month ago 



4.75 


years 


20 25 

-Mytokfcm 
StararttnOHjaft Mot women 

FTSE Afi-Share Index 


2460 



Sep 1996 


Diageo. The last-named bas 
been the subject of a number 
or profit downgrades 
recently, as analysts fretted 
over Calling sales in Asia. 

But what has been bad 
news for equities has been 
good news for gilts, with the 
10 year yield dipping to 5 per 
cent for the first time since 
March 1957 last week. 


COMPANIES DIARY 

ENTs gas earnings 
to bolster results 


Ente Nazi on ale Idrocarburi 
(ENT), the Italian energy 
group, is expected to report a 
first-half net profit of 
L3.000bn-L3.420bn on Tues- 
day. up from L2,620bn 
($L47bn) a year earlier, as 
extraordinary gains and 
strong earnings from gas 
and downstream operations 
are likely to offset heavy 
losses from exploration and 
production, analysts said, 
writes AFX in Milan. 

“Eni’s first-half results 
will be a lot less dramatic 
than those of its competitors 
such as Royal Dutch/SheU," 
said Angelo Imarisio. Uni- 
prof oil analyst. Jeremy Hud- 
son. analyst at Salomon 
Brothers, expects ENI to 
announce a first-half net 
profit of L3,420bn. However, 
after stripping out non-re- 
curring Hems, net will rise 
to only L3,030bn, against 
L2,670bn a year earlier. 

Mr Hudson said that while 
ENI was probably looking 
at the stock-market values” 
of small to medium-size oil 
groups with interest, he did 
not foresee it pursuing a 
much-speculated takeover 
bid for Enterprise Oil of the 
UK "I would have thought 
[Enterprise] would be a bit 
beyond their reach as 
itwould leave debt levels 
higher than where ENI 
wants them." he said. 

• flat, the Italian automo- 


tive group, is expected to 
report a first-half operating 
profit excluding insurance 
activities of Li,57i0bn 
-Ll.Goohn on Tuesday, 
against Ll .904 bn a year ear- 
lier, AFX reports from Milan. 
Pre-tax profit will be 
Ll,6370bD~Ll,979bn com- 
pared with L2,263bn. ana- 
lysts said. 

Flat's results will give a 
clear indication of how the- 
group’s underlying perfor- 
mance bas withstood thin- 
ning profit margins in 
emerging markets. Analysts 
agree that increased profits 
at Iveco and New Holland 
will not fully compensate an 
expected decline in Fiat 
Auto profits. 

Monica Bosio, Eptasim 
analyst, forecast operating 
profit BTcbirfing insurance of 
Ll,571bh, out of sales of 
L47^60bn. “Fiat Auto really 
bad to slash its profit mar- 
gins in emerging markets 
and this is really going to hit 
operating profits," she said. 
Ms Bosio expects Fiat pre- 
tax profit to fall by 12.5 per 
cent to L1^79bn. 

• Telecom Italia will next 
Friday announce a first-half 
netprofit of L2,210bn 
-L2,4O0bn, against Ll,830bn 
a year ago, and sales of 
L21.300bn-L21,400bn, up 
from L20,519bn, according to 
telecommunications analysts 
and fund managers. How- 


ever. they said the market 
was expected tp pay more 
attention to the group's pro- 
posed three to five-year busi- 
ness plan than Hs results, as 
they hoped to see details on 
the restructuring of the com- 
pany's domestic business 
and clarification of the 
group's international strat- 
egy. 

Caboto SIM telecoms ana- 
lyst. Deirdre Ernest, who 
expects a first-half net profit 
of L2,2l0bn on sales of 
L21,400bn, said she was espe- 
cially interested in details of 
the restructuring of Telecom 
Italia’s domestic business: 
“We have heard from union 
sgprpes that Telecom Italia 
and Telecom Italia Mobile 
plan to outsource their data 
processing units to the 
group's information technol- 
ogy unit, Finsiel, but we 
don't know bow much Tele- 
com Italia will pay in out- 
sourcing costs.” 

• The mild winter and 
increased generation of 
power by gas-fired power 
stations will probably have 
hit pre-tax profits at RJB 
Mining, the UK coal produc- 
tion company which reports 
tomorrow, unites Martin 
Brice.. The future direction 
of the share price will proba- 
bly be decided by the result 
of the government's energy 
review which is due to be 
announced at the end of the 
month. There have already 
been reports that the govern- 
ment will press ahead with 
its proposed moratorium on 
new gas-fired power stations 


as part of its efforts to 
reform the electricity market 
and support the deep-mined 
coal industry, where up to 
3,000 jobs are under threat 
Analysts have pencilled in a 
60 per cent fall in pre-tax 
profits to £35m ($58m), and 
there may be a dividend cut. 

• Tarmac said at its AGM 
in June that year-on-year 
price increases were being 
achieved. Analysts will be 
keen to hear tomorrow of 
any success in forcing prices 
higher across the industry, 
and of the need to update its 
US facilities. BT Alex Brown 
forecasts a 14 per cent 
advance in interim pre-tax 
profits to £44m. Chris Grant 
at the broker has told cli- 
ents: “We believe further 
price increases and higher 
US construction spending 
offers a promising outlook." 

• The maiden full-year fig- 
ures from Diageo on Thurs- 
day will probably be hurt by 
the strength of sterling and 
the financial crisis in Asia, 
which are expected to have 
particularly affected its 
spirits business. However, 
the food side and its Guin- 
ness business may also have 
suffered, although in 
recent trading statement the 
company said beer sales con- 
tinued their strong perfor- 
mance in North America 
with volumes up more than 
20 per cent. A consensus 
from First Call suggests an 
underlying pre-tax figure of 
£1.9bn, a slight drop from 
£L93bo last time. 


LONDON MARKET DATA 


LONDON RECENT ISSUES: EQUITIES 


tow 

Art 

IK 

price 

prtl 

to 

P 

V 

(tin.) 

. 

FT. 

10.430 

■ 

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03S 

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1937 

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FP. 

- 

• 

FP. 

• 

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nas 

- 

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3716 

_ 

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- 

- 

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1*9 


up um Steen 


cte 

MX 
P **- 


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dh. on. yU nat 


6 FP 
§100 FT. 
§ FP 
FP. 
§65 FP. 
■ FP 
• FP 

- FP 

- FP 
§a fp 


471 

29.1 

a? 

402 

405 

152 

496 


2.46 


859 

626V MO Zorich 

6G6 

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122ft 


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112ft 


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■gMto to ri otar own* ptw 


1 RIGHTS OFFERS 

tow AmouA 

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Stock 

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price p *flf 

520 m 

1025 m 

(npraton. 

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5710 3 Bpn KpD 

Camel Lakd 
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3 ftpre 

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FTSE GOLD MINES INDEX 


% ton 

Sep ton HU tap 
18 VUtim Sba 

% rt 

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Haw ytaU % ratio 

52 tort 
tort uw 


Gl*tMtoMlndn(27) 38325 -7.1 3044 10000 201 


- 153545 7 D 12 B 


AMC3IB) 
AutMaiia (7) 
Americas (11) 

CBpjnghL FTSE 
Baa IB Men 


STOCK INDICES 


FTSE TOO 
FTSE S5P 
TO 250 o IT 
TOJ50 
ftse sraacx 
TOSMKaowH 
TO 


— MSB - Son comp. 

Sap 16 Sap 1 i Sep IB Sep 15 Sep 14 Hpd Um H» Low 

5055 fi 5 T 3 J 3 5291.7 5281.7 5268.8 6 T 79 LD 90550 B 17 M SMO Fig ft 033 
46464 4687.2 47 S &6 4723.3 S 73&7 


106205 -30 X59 2831 458 41J9 1525.25 76503 

1M&94 -93 2J3 806 102 72S T 60165 81533 

94907 -8.0 19.13 6233 0.72 55.77 157416 W£B 

Urtcd 1996. M atfto nomao. Rpm b tuadmo tfmr anOc nf ajwpnlei. 
Mas 100000 J1/12WL t M4 


-1996 - Sines comp. 
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13794 FTSE Eunkp 100 
139X3 FTSE Etwtop MO 


40974 47437 46110 477X3 47330 60300 4tiixa June 137U FBI 
^ 2^1 =292^0 ®61 £ M 

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31021 3152-9 32679 3286 0 S7I2 39840 3102.1 38840 4 M 

111J» 111M 1100$ 10908 10902 HUB 9301 14104 40.18 

15102 15049 14905 14900 14005 mnz HU7 13102 5053 

gttg 97707 34089 959J8 05426135157 7013207451 TpiJO. 


To advertise your 


Commercial Property 


And reach 52,000 property decision makers. 

Contact 
Tina McGorman 

+44 0171 873 3252 Fax +44 0171 873 3098 


FRANKFURT 


By Andrew Ffeher 


Benchmark yield cwve 

mr 

525 


Investors are likely to 
remain well under cover 
after the short-lived recover)' 
in the German stock market 
was succeeded by a further 
bout of selling at the end of 
last week. 

The Dax blue chip index 
again succumbed to fears 
that the financial crisis that 
has engulfed Asia, Russia 
and other emerging markets 
could develop into a 
full-scale global recession. 
Also upsetting sentiment 
was the frustration of hopes 
of an early cut in Interest 
rates In the US and other 
leading industrialised 
countries. 

Landesbank Rbeinland- 
Pfalz expects the German 
stock market to remain 
weak and volatile in coming 
weeks, with the Dax ranging 
between 4.500 and 5,100. On 
Friday, it closed at just over 
4,620, having begun tbe year 
some 400 points lower and 
briefly Edging above 6.000 in 
the summer. “It is certainly 
too early to sound the 
all-clear," the bank said. 



30 nears 20 30 

rcrtct amenta 

Dax index 


5000 



11 14 15 16 17 13 
Sep 1996 


Traders were further 
disheartened by tbe fact that 
foreign investors continued 
to sell German share!, in 
spite of the declining levels 
of recent weeks. 

The outlook is also 
clouded by uncertainty’ over 
the outcome of the German 
general election taking place 
on Sunday. 


TOKYO 


By Alexandre Harney 

Investor concerns about 
corporate profitability and 
uncertainty in the banking 
system will weigh on the 
market this week in Tokyo. 

Politicians reached a 
last-minute compromise on a 
plan to revitalise the 
troubled flnundal sector 
before Keizo Obuchi, the 
prime minister, left to meet 
Bill Clinton. US president. 
The market will be watching 
the results of this meeting 
and looking for more details 
on the financial reform plan 
this week. 

The problems of the 
banking sector and a series 
of gloomy corporate profits 
warnings hit the equity 
markets last week, dragging 
the Nikkei 225 average to its 
lowest in 12 years. 

The Nikkei rallied at the 
end of the week amid reports 
that politicians were nearing 
a compromise on the 
financial reform plan, 
gaining 123.9S points or 0.9 
per cent to 13,983.12 but still 
244.25 points below its close 
on Monday. 


Benchmark yfeW curve 

r*r 

2150 — 

£00 —187071998. 

«=» Moran ago 
1.50 



5 years 15 20 

SoRrUndlnx* ngrt a taniWBM 

Nikkei 225 Average 

roooj 

144 





14 JO 


135 . 


11 14 15 IB 17 18 
Sep 1998 

Snare RE095 


Bond yields plunged to 
record lows as investors 
switched out of equities on 
concerns about deteriorating 
corporate profitability. 

The yield on the 
benchmark 182 10-year 
contract fell to 0.645 per cent 
before rising to 0.67 per cent 
at the close. (1.005 above the 
record low set on Thursday. 


NEW INTERNATIONAL BOND ISSUES 


tout 

n Italrtj 


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An % qnaam 


US DOLLARS 


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miUttLBE 


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« U/fiC 903. 24-2W*} 133 
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HBCH FRNCS 


Jd 2007 7.125 109255 
Sep 2038 (pi 9982R 
Dec 2008 625 104045 
Dec 202B BOOH 107X2 
Jui 2021 6551SI S9S24 
Hn 2094 600 101074 


6758 - (Min Dtan ftrtl 

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6484 <6g®W)ec2B| Bfedns Caplrt 

JP Ito^n Seaifcs 
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by tod ium 0 h. tCaiKtltoe >fttong-rato note fWHi stay rorant MMsU BSetM-anml 
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0 MI Ecu bonds, fl Fmofl* Mh £ 2 ba. Ptos VS (toy* acaaed to Fuggto S 2 Jhn Fte 222 days 
rawd to First* wlb noon Hub 52 days accrued | Dm kmrprtad yHU 0 FingHe wtto 
Q&Bn. PIE 13 days nccnmL Amagi Me. 2 £yn. CatadBlna Sep 05 at pi. ID 3 hoBi Ubar tiBbp 
la Sep 05. men iSdn. |2I Das B d ESSm and Oas& M d £8 im nre pnvaWy dacaL k) FwoUe 
■Kb £700* Plus 245 days jeeraed I long IS coupon, mi Banc Dim Hetoc TiusL Smna an 
raortTOK. Auengs He 3 « yrs mil 1 -artb Lira iZSbp. M FungUa nrt Cl bn Bus 1 B 6 dap accnad 
a) Cduc ReSdBrtd kitfi Uorfege SecaUBaron Onuntu Ftt Mfta dc. CaUto inn Aug 06 d oar 
oil Serti Qfaor tZOp to Aug 06. nen 4 S 0 bp o 2 ) Cbss B d man priced today. rtMhMkto 
Pladbrief q) Toyota Ado Lean Tm4 Mootoy comoos. Laffd marts* qi) 2S77TO. oil 2S73AQ. q3) 
2S/12A3. D Mflrigoge Lon Asset Bactod Certflcato r 1 |Au Lrie lSyra. l-mti Ubor 31 bp nAvto 
05 yn 1-antti Ltor i32bp. rfl A> Me 08 yn. i-mii Ubor 425bp. i4) A* Bn- 28 to 1-fflh Ubor 


426bp. si Short imjumwi. Q How EquHy Hon Tnat 6 tranches, u) hekato ClSto tacrarne 1 1 
9^582%. vi FdrttoTwm filet Pis 303 days accrued wi Itoiemal m T to S rtoerrdng i 


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observation period, i) Crtatoe amoany treoi iBhOiDS to par <11 11>i% hyr r. 6V tow Z 5% hyn 
3-5. 4*j% to yn 6-7, lion 15% - 2 a 12-n* Um. Mott YWdo are akuavd no ELK basts. 





y‘ : - ' l . - 

_prewja(l^^:a-; 

t ftWcon^ultants/^dvisers to aa^stj upgr^qg of fta Human 

^* fculan ; -.A. 

of Organisational Structures andGrades 

Remuneration and Benefit Pracjto ■ 
fttment and Selection 
Resources Audit, 
iternal Communication Strategy 
. ‘ F^ftng, " 
eTrainfrt^t, 


wcniFire i.caMivcav' .‘ -i 

\ . \ * • ‘ 

tegy ■■ .;‘v> 

,? .V i •• ‘ 

K^Documen|s^oy be obtained free of Ghtege from the office of the -f^Xxn ' M S • 

1^,101 De Korta^reet, Braamfontein, Joharm8at>urg 2001 , South Africa;*, , • . . *.;/■ .’ - ^ 

K^. ■ ■X/tfvh i t '■■■ . ; “ ’ ‘ f p* .. . ' 

proposalicte^es at 10UJO on Tuesday, 6 October pKawsataiipcaived late win tx 




A 


ROYAL BANK 
OF CANADA 


Dividend No. 445 

NOTICE IS HEREBY GIVEN 
THAT a dvktend of 46 cents 
per share upon the paid-up 
Common Shares ol this Bank 
has been declared payable for 
the current quarter on and 
after November 24, 1998 to 
shareholders of record al 
dose of business on 
October 26. 1996. 

By Order of the Board 
Jane E. Lawson 

5&nVk*-PreskieniSSecretBrf 

September 10. 1998 


To Advertise 
Your l^egal Notices 

Please contact 
Melanie Miles on 
Tel: +44 0171 873 3349 
Yax: -44 0171 873 3064 



of activities 

Turnover (Profama) 

+ 1 BJS% 


Growth of 
operaUn^ profit 
aftertax 

(proforma) 

+ 17 . 9 % 


Net 

tadebteiisess 
198MFRF 
&1% share 
holder's oq^ty 


Group structure has progressed from 1997 to 1998 due to : 

>■ Entry of the Italian compar* Mondoffice acquired in December 1997 and fuBy 
consolidated from the 1st January 1998. 

>• Dispose! in June 1998 of Aenir, holding company of the joint venture in JJA. 

Bruneau. The company is deconsofidated since the 1st January 1S98. 

Due to the expansion of our activities outside of Ranee (5836 of turnover) the 
comparison of results Is more meaningful using proforma accounts at constant 
Group structure, exchange tare and 1998 accourtir^poricies. 

Turnover reached 3210 rrtBons Rendi francs thanks to sustained growth througfiax 
the &oup. France and the United Kingdom (3996 trftumowf) haw progressed 17% 
and I4i% respective^, the rest of Eiinpe has progressed by 25.4% 

Operating profit reached 254 millions Bench francs, 10.4% increase over 
proforma 1997. 

Profit after tax of 171 millions French francs has Increased by 17.9% compared 
wth prior year proftyma profit of 145 millions French francs. 

Netprofit before amwtnatlcn of goodwill attained 273 mSlons Bench francs. ti*i 
includes the 112 millions French francs impact cm disposal of Avenir (holtfing 
company of IM. Bruneau). 

The net result -Group share- of 249 mMHons French francs includes depredation 

of purchased goodwill over 40 years rather than 20 years as accartted orovtously. 

Ootlooksfbrtln Mcond half ywr 

July and August 1998 results are on Hne with those of the lkst half year. Thus, 
1998 Should confetti the good trend already recorded in the first half year. 


GHOUPE P1NAUL7-PR1NTEMPS-REDOUTE 


& .*v 










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By Jon 


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26 


FINANCIAL TIMES MONDAY SEPTCMBERi21 1998 








CURRENCIES & MONEY 


Panic might ease 


POUND SPOT FORWARD AGAINST THE POUND 


DOLLAR SPOT FORWARD AGAINST THE DOLLAR 


Sq it4 


Oratvj Ctsnjc BOUfer 
BH-fdnt on Cay queatf 


DaflW 


Oh mtn 
pas «pa 


TMetweni Ontvaar Sokol 


Rate %PA Hae %M Em Wb 


By Simon Kuper 


It is now just over a month 
since the global market cri- 
sis was sparked by a letter to 
the Financial Times from 
George Soros, the hedge 
fund manager, who called on 
Russia to devalue. 

That doomed the rouble, 
which dragged down most 
other emerging market cur- 
rencies in its wake. The tur- 
moil hit western stock mar- 
kets. which had long been 
seen as overvalued anyway. 

In the middle of it all. Ken- 
neth Starr accused President 
Bill Clinton or perjury and 
called for him to be 
Impeached. Traders have 
hardly had a quiet night in 
weeks. Markets have occa- 
sionally rallied, but never 
held on to their gains. 

The question this week is 
whether the panic will start 
to ease. It depends on three 
questions: will the west help 
save Brazil, and with it most 
of Latin America, from 
devaluation? Will President 
Clinton survive? And will 
the US cut interest rates to 
help emerging markets? 


The president’s future 
looks brighter than it did a 
week ago. Admittedly a pain- 
ful videotape of his testi- 
mony to a grand jury about 
his private life is released 
today, but most of the public 
seems to want him to stay in 
office. A fading of the uncer- 
tainty should help Wall 
Street and thus the dollar. 

The Brazilian question 
appears open. The Interna- 
tional Monetary Fund and 
western governments are 
clearly trying to find support 
for the Real but a currency 
can collapse very quickly, as 
countries from Russia 
through Venezuela to Thai- 
land have found recently. 

Last week the notion faded 
that the Federal Reserve 
might cut rates. Alan Green- 
span, Fed chairman, said 
there was no concerted inter- 
national plan to loosen mon- 
etary policy but he also said 
deflationary pressures 
seemed to be increasing. 

There is a paucity this 
week of data on economic 
growth, which would reveal 
whether or not the world is 
tumbling into recession. 


hll|B 

AsWa 

Bdgkrn 

Dennrat 

Finland 

France 

Bennany 

Cruet 

keand 

levy 

LunnlXHB 

Neftertareta 

Nnwaj 

Portugal 

Sgam 

Swoen 

SwttortjfxJ 

UK 

Eau 

sen 

America* 

ftgoflna 

BrazU 

Cnti 

Mna 

USA 

ftcOc/Mdd 

AM 


Hang Rang 


Japan 

I 

NewZetmi 
PMnxnes 
SauS Aratta 
Sngqnre 
Sooth AUca 
South Korea 
Tahwi 
TWftrt 


(SchJ 

204555 

*0493 

459 - 650 

204785 

m 

583063 

*2252 

588 - 577 

584640 

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EURO CURRENCY INTEREST RATES 


EXCHANGE CROSS RATES 


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Open 

term 

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LOW 

at Mi 

Open H. 

Dec 

94.75 

94.76 

*0.01 

94.78 

94.74 

132113 

487,057 

Mar 

9501 

9503 

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136195 

481085 

Jun 

9506 

9512 

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9560 

9541 


9537 


195 1311 

18 141 

42 22 


POUND IN NEW YORK 


Sep 18 

— Ctaae — 

-Prey, ctaca 

SUM 

16815 

16815 

1 roCi 

10791 

10790 

lirph 

161*0 

16735 

ivr 

16S3S 

1.8540 


I OTHER CURRENCIES 


FT 6UDE In WHILD COHIBCIES 

Sep IS 


BJW RETURN 

Cut* Ad 522462 - 523247 31.0140 - 31.04*0 


The FT Gukla to World Cummoes tattt 


370.174 - 370040219740 - 219040 

The Bark Return table can be tared on 

can be tound on the Coraganies and 

Iran 

505650 - 505300 300000 - 300000 

page 31 in May’s enter. 

Finance page 11 today's edtton. 

iliwal 

00)23 - 65131 63041 - 03044 



Pen 

50041 • 50936 10180 - 10220 



PoteaJ 

RasM 314337 - 326987 116001 - 19.4000 
11872 - 11910 36728 - 36731 • 


UAE 



^GNJ 

LONG & SHORT - 

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8 MOBOOS 3833275 
23 ItaSe) 193361 
60 JUOJ0D 224 - 

WftfflFW 14 - 


' 41 






■ W nxx M IX A m tatat * n retkalta E tadtai Mb. x E> ddOM Ckataa reXpacti oa *om h aaok pre £*» «*d d ota<. Mk pueMiat <*taBM m ■ 

tax 5- reaaahe pnea. 


ixaRUaie 


**4 


S«r 







•As?: 




m 






































LV 


\&£> 



*>*. 


*w* 


a.-wr. 

*?4W 

-to;-'.. 



-■-m 

tot if. 

mm 

-r&w 

*T 

*--W. 

•tat* 

IVrvi. 


-•Hi" 

'»►- 


- -tort 

■^»ta 


♦ isr. 



"-V. 



■ ■ms 

. s..... 


FINANCIAL TIMES MONDAY SEPTEMBER 21 1998 


equities 


27 


EURO PRICES 


Focus turns to German polls 


CURRENCIES & MONEY 


FT SYNTHETIC EURO RATES 


Curacy 

axle 


□Mug 

mn paw 


Qngi Ctenga 

an dw i da <fk 


Cringe 0>V 
an wKk peek % 


Synthetic Euro against the doftar 
S per cum 


tjo 




; 

,'jw ..>«■ 


* J -V 

•• * 

■•vk,: 

‘ *rv 


JJii 


• "i i 
+: v- 


hjropean overview 

By Martin Dickson, 
Financial Etfitor 


i'Wt *W 

? : *i ' S ■ 

- + * rw. 

a* 5 * -dm ' 

.-kwcS* 

■*’ -fa** ■.m-v 

-I*. j,* 


European equities will 
remain battered thig week 
by mounting concern over a 
global economic slowdown 
and by a political calendar 
that wiB impinge heavily on 
the finftnriai markets. 

Tuesday's meeting of Pres- 
ident Bill Clinton of the US 
and Japan's prime minister 
Keizo Obuchi may throw fur- 
ther light on the steps 
Tokyo, pressed by America, 
is prepared to take to revive 
its economy and rescue the 
banking sector. 


At borne, European atten- 
tion will be focused on the 

last Week Of nawip ar gnTTig hi 

Germany’s closely fought 
federal elections. Voters go 
to the polls on Sunday. 

Markets may ai«i be more 
nervous about the outlook 
for European corporate prof- 
its: last week delivered sev- 
eral blows to the widespread 
belief that “fortress Europe” 
would maintain growth 
despite global economic 
upheaval, with both Royal 
Dutch/Shell and Alcatel 
delivering gloomy trading 
statements. 

Nevertheless, Hana Tiet- 
meyer.the Bundesbank presi- 
dent, said on Friday there 


was currently no sign of a 
global recession, even less 
worldwide deflation, and 
Japan held the key to the 
development of the world 
economy. 

He also warned countries 
participating in European 
economic and monetary 
union that they should start 
taking steps towards interest 
rate convergence sooner 
rather than later. The lon- 
ger the convergence of cen- 
tral bank rates is delayed, 
the larger the steps taken at 
the end of the year or the 
start of nest year will be.” 

The FT*s euro-zone cur- 
rency convergence table 
shows that forward 


exchange rates are still 
implying large forward inter- 
est rate differentials for “in” 
countries at the end of the 
year, with German short 
rates at around 3.48, com- 
pared to around 187 for Italy 
and 5.31 for Ireland. But 
many analysts expect cen- 
tral banks outside the core 
D-Mark currency bloc to 
leave convergence until the 
last minute. 

In trading on Friday, the 
FTSE Eurotop 300 index of 
leading European shares 
closed 13.73 points lower an 
the day a t 1Q21. 87, while the 
narrower FTSE Eurotop 100 
index closed at 234437, down 
32.11 points 


Bn* 




■ft 

■ 4--..JT 

^ V 

"i*"* 


.*i- ( 

• -.t* 

-«1H 

4 

'} ■*.- r. 

-4P 

jKdid 


> *L 

■» - - 

J 

• j. ac 

*7*- 


S K 

. 4!=- 

•Ail 


W.A 

:■ «** 

-5m; ; 



*•' V 

• jt-L. . 

'A*: 

W: 




■ nBgiwKraajROFtrrwffiSOJFrg) Eanm pom of ioo% 



1 * 

* 

Nw 

Open 

Sen pries 
96465 

Cbangg 

-0030 

tom 

low 

EsL wl 

0 

0pm tot 
0 

*- 

- 


to 

96490 

96455 

J1IWI 

96490 

96460 

122 

5197 




Jun 

96460 

96420 

•0.060 

96480 

9B440 

180 

1976 

-t- 



•’ Srt 

96.430 

96390 

-0070 

96430 

96426 

44 

1333 


■ THRBE lllljini BUM OPTHMB (UPRQ Balm paMa o> 100% 


MMKvhflPM**-' 

- -- • ••••— 


• '••■nr- >r 

*■4-: :* . •„ . 


"A 


MM C0HJMHFK! f ;V:S 


* 


stita - — 

Price Oct 

Mar 

CAilX - 

Dec 

Her 

Oct 

Mo* 

PUTS — 
Dec 

96375 0JE0 

96500 0.015 

6020 

0.106 

aaeo 

0.145 

amo 

0.180 

0185 

0.145 

nm 

Ed. ML mu. cm o na a Pmtouii&Tt area ml Cab a na o 




0.190 


■ FTSE HBOIBP 100 MDEX WTOHEI (UFFE) Ecu20 par Ml tatta potal 



Open 

sen pries 

Qimgs 

mm 

Lnr 

EsL wl 

Open It 

Sep 

23500 

23805 

-185 

23600 

rasas 

360 

22S4 

Dae 

23660 

23630 

-410 

23840 

23640 

485 

4000 

liar 


2371.5 

-410 



0 

117 

■ BOO STYLE FTSE BROTUP 708 MDEX OPTION {ABO EculO par IrakB poU 



2366 2375 2400 

M25 

2450 

2475 

2500 

2525 


CPC 

P C P 

C P 

C P 

C P 

C P 

0 P 


Sap S7 15 40 M2SS4U51 S60I91 3 TIB J 141 

OB HE 137 116 12? IE 1® 137 96 IBS M «S 73 17E S3 «2 54 

Eat m tabto . Pie* fa* cptei tend ut 7482 . (Mm MM m Mad m mm |An 


OTHER INDICES 


Srer 

18 


n 


Sep 

16 


1938 

Hfh Urn 


ShcecuepftdUn 

Bpb Lnr 


- a 


<«+./■ 


DJ Stow 50 2821J0 286421 2996S7 3SKUB 2574S1 aSOSZ 282U 

DJ Elio Sb SO 2781 SB 283622 2871 S3 385448 2*081 386848 27B1JB 

HSQ Eiaope M 103754 1079.17 131866 ' 96Q50 131555 SI 078 

SBURK bowpan at FT Mmton. *Sec|ettte mMon nMI fa. W Mttk. 


I FTSE Actuaries Share Indices 

I rrr.ic-.-.'; -r r.v, sr;- ':r S.l; oro : 

European series 

■‘I'-U'C vi Arj;!MC!o 

Saptesrimr IB 

Naflcral & Ragtanei 
Harm 

Ecu 

am 

Dsfa 

* 

ctage 

paints 

VUd 
grass % 

*d *4 
JM 

Tnd retn 
feu) 

FTSE ElBDteD 300 

1021 07 

-1.33 

-1173 

229 

2X78 

104190 

FTSE BmdoplOO 

234407 

-105 

-3X11 

176 

3406 

838.26 

FTSESdoclOO 

84208 

-102 

-1127 

226 

1409 

65456 

FTSE BrokM 306 Bagfam 






EaroWoc 

1064.43 

-121 

-1305 

X43 

2054 

1000.12 

UK 

05449 

-105 

-1501 

329 

?»>!» 

99608 

anpe Bt-EureMoc 

98759 

-145 

-1450 

117 

2400 

101850 

Eurape QHX 

106022 

-122 

-1305 

249 

19.11 

107921 

FTSE tuntop totott* Sedan 






HBOBHOBi 

82105 

-203 

-230* 

353 

2541 

854.76 

Enractoe todtartae 

71704 

-073 

-520 

459 

604 

72103 

OftMapnlBd 

75408 

-207 

-2349 

847 

1625 

810.11 

Oft EaptosBcfl S Plod 

576.13 

-600 

-5629 

556 

1100 

56117 

GENERAL HD06TRB 

92202 

-147 

-1179 

306 

1859 

94020 

Conatnjdtan 

87002 

-304 

-2720 

124 

1108 

88055 

Buktog Usto & Meretre 

77442 

-202 

-1842 

327 

805 

78119 

CtMotaii 

79206 

-nipi 

-4.75 

3IK 

1857 

80607 

HndMMuMib 

89629 

-009 

-&D5 

244 

1746 

91157 

Baetm* * Sod Bpdp 

725.75 

-141 

-1040 

222 

458 

72926 

EngtoMrino 

77745 

-157 

-2677 

422 

057 

784.72 

Piper. Peiq & PiMng 

66602 

-105 

-955 

136 

121 

G9659 

CONSUMER BQCBS 

1047.13 

-104 

-1746 

177 

1557 

107X93 

Artmttea 

82542 

-0.10 

-109 

117 

1D2S 

Ararat 

Aknhofc Bewn0B 

77305 

-408 

-3009 

223 

648 

77605 

Food Ptoducsft 

B31J75 

-123 

-1029 

104 

979 

838.72 

HanreheH Geode ft Tads 

B3531 

-405 

-45.16 

220 

701 

891.70 


80403 

4327 

425.49 

148 

052 

61201 

RamraciatMs 

955.71 

-103 

-607 

128 

451 

oral ai 

TetBCCO 

111006 

4028 

4106 

424 

151 

111X74 

SERVICES 

106705 

-105 

-1705 

247 

21.19 

108129 

Dfaftfeudon 

737.73 

4221 

41605 

301 

1157 

74602 

Utam & Hotste 

644 JB 

-542 

-3802 

189 

1227 

65119 

itadk 

93622 

- -009 

-650 

248 

953 

947.16 

fwafcre. nod 

97506 

-057 

-5.62 

206 

1127 

687.17 

Relalea. tonsad 

94207 

-123 

-T2J5 

355 

1653 

95024 

TtocaimBkaaom 

075.78 

-101 

-1504 

201 

1102 

98754 

Bfenrfei, Pito & Rada 

68428 

-101 

-1123 

306 

1420 

69459 

Simort Services 

8461 0 

-450 

-ram; 

177 

654 

85202 

Transport 

86177 

-006 

-675 

277 

1500 

89BOC 

IrdannaQoc Tadwdogy 

86000 

-555 

-5229 

046 

223 

6B2J2 

BIUTB 

136613 

4027 

4174 

122 

5322 

144323 

aecWcfljr 

1030.10 

4023 

4229 

340 

2623 

105751 

Gas DkiiflxdkB 

105612 

-022 

-327 

1.72 

8451 

115655 

Water 

106002 

4140 

41507 

473 

3872 

112220 

nuKuto 

105302 

-058 

-6.11 

121 

2945 

1061.19 

BufeRafidl 

72121 

-077 

-552 

424 

1259 

73253 

haurarca 

828.11 

-0.14 

-1.17 

157 

1145 

83728 

Lde liremcs 

ft53O0 

-005 

-626 

1.79 

9.10 

66(56 

Other Rnsndtd 

74409 

-aio 

-072 

272 

1405 

76058 

kweetmant Orenpartes 

61640 

-5.17 

-4453 

114 

2056 

63156 

Proprrtr 

75303 

-004 

-029 

354 

1601 

76657 


AunriB 

ATS 

14067520 

*00014 

+001 

+00041 

-003 

BftOta 

m 

41220580 

-00031 

-001 

-00079 

-002 

Cneh RqrebBc 

CZX 

36548528 

*00642 

+0.18 

+00706 

*143 

Damork 

DKK 

7517659 

-TUTOR 

-003 

-00074 

-010 

Ftant 

FM 

Bttaaoi 

*00033 

+000 

+00035 

+006 

Raoee 

RIF 

6596995 

-0.0017 

-003 

-00038 

-006 

Gsrmav 

D EM 

1097840 

+00002 

+001 

+00006 

+003 

fineece 

GRD 

343282840 

+0.0703 

+002 

-08111 

-024 

Hregay 

HUF 

250595214 

-14263 

-aio 

+02960 

+011 

total 

B> 

0J9S54S 

-00009 

-ait 

+00000 

+000 

fey 

m. 

1974230320 

-00999 

-002 

-+0.47S2 

+002 

lineratnog 

LUF 

41220588 

-0.0031 

JO 01 

-00079 

-002 

Hetatnfc 

NLfl 

2253195 

+00002 

+001 

-00001 

+000 

Momay 

NDK 

1856993 

-00182 

-020 

-00723 

-001 

Mend 

PIN 

4246075 

-0JHQ5 

-039 

-00495 

-1.15 

Pubvd 

PIE 

204.756478 

+00049 

+000 

-00251 

-001 

Roareto 

HOL 

10718533886 

-507437 

-055 

+90679 

-008 

Rutal 

Rue 

22441126 

+4 7942 

+27.17 

+07141 

+6348 

Sofeoi 

Sffi 

4103Z792 

■ +00601 

+020 

-01495 

-036 

Sp* 

ESP 

169.772128 

+0.1004 

+006 

-00410 

-002 

SMden 

SBC 

0261 876 

-00218 

-024 

-00199 

-021 

Swflzertaod 

or 

1543390 

+00023 

+014 

+00015 

+009 

Uniaa Ktegdoca 

GBP 

0.700966 

-0.0031 

-0M 

-0OD16 

-026 

ECU 

Areericm 

ECU 

101 6696 

-00005 

-005 

-00005 

-005 

Brito 

BRL 

139*650 

-00076 

-054 

-00001 

-0OD 

Canada 

CAD 

1005320 

-000*8 

-027 

+00147 

+08? 

Matted 

ION 

12006892 

-02875 

-234 

-04756 

-361 

UoUfld Sues 

USD 

1.181106 

-00072 

-001 

-00023 

-019 

PadflcMriAs Eeat/Afriea 






Aurtndb 

AUD 

X002092 

+00007 

+003 

+00364 

•105 

Hong Koog 

HQ) 

9.150026 

-00571 

-062 

-00207 

-023 

taran 

JPY 

156590360 

-02840 

-016 

+1.8061 

+1.16 

Brtm 

S6D 

2034455 

-00125 

-061 

+00000 

+004 

South Abtei 

zm 

7254942 

-00563 

-077 

-01588 

-214 



EUROZONE CURRENCY CONVERGENCE 

Bfenecal convenm ntos aaana B» D-ltrt 

Fried Marital Dfll rid Week Fonrart Forward DH tat 


Sap 18 

rale 

rare 

vmM% 

ago °* 

rate 

U rate 

raevHM 

Austria 

703552 

70364 

+001 

+001 

7.0377 

305 

+007 

Satan 

200255 

200326 

+003 

•DOS 

206347 

353 

+004 

France 

3-35396 

33531 

-002 

+0U 

33536 

153 

+005 

Finland 

304001 

30459 

+019 

+0.17 

30465 

305 

+007 

total 

0 40376 

03997 

-a74 

-on 

0 4019 

5.43 

+104 

ur 

990002 

9683323 

-018 

-018 

99X0668 

466 

+1.38 

LinemotuB 

20O2S5 

200326 

+003 

+0 00 

20 6347 

352 

+004 

Kethotareh 

1.12674 

11276 

+009 

+013 

1.1274 

335 

-013 

Pmvd 

103 505 

102.4689 

-002 

*002 

1020729 

4 11 

+003 

Slta 

850722 

640770 

-Oil 

-006 

85.1635 

405 

+077 

Genmr 

l 


+000 

+000 


3.48 

+000 


I LHTMo bM9 6m e meore nc. aji tent h: n» to toe End apunsr onus 
I bp 6 OP w alpW i la Bed *ta* uaian p aa. Tha Eon *41 net anA 

• 1 red to atae ante not bo nod as a pracm gride n in tribe. Ibdefaud bdm 
. email wetpMagi M fata* OBI 05364. FRF 02217, ITU Bl 823. 
1 amw, PIE 80156, MS 00328, FW 00167. 


BONDS 


Bond yieW curve 
P*r cart {Septenton 8 1990) 


Souw Vie WH CHwwy Fried rates are Nafeial mb apeMl m Eu 8» M bread isles are 
aa i a age ratm n 31/19U w miUMil torn natal oasts Wad mm M ■■ bom irM to 
thrsa fenaid exAsnge or M m rales* DEM at tfarenoG tonttoi tapM bread nweB 
nses and to OBI tenon! marea rate to aiiizrea DEM lawn! hkm nae to 3i"i?S8 a 
akutoKl to tetopdlatai benK«n pubtdmi EDA oortrl hanga 


EUROZONE CORPORATE BONDS 


Sap 18 


Red s & P Ed 

03K Coupon Rating price 


Dtoi mi’s Spread 

H dp to ' 

ltd pd yld Era 



Ecurata FupMa 

BMgfenlRlngdDinoQ 

Imm 

vm 

5.7» 

K'A 

111230 

427 

+002 

-043 

+007 

Francs (Rrp an 


0250 

NiA 

106680 

411 

+000 

-046 

-009 

8aty(REpafi 

twos 

5000 

AA 

194 590 

4 41 

+ 001 

-032 

+021 

Ptn«d (Rep an 

06/08 

53« 

AA- 

107.860 

4 37 

+003 

-037 

+017 

BmlnuBB 

Abbey MtTnasBv 

02/03 

4 B75 

AA 

103.208 

406 

+om 

-027 

+0X1 

GenBectrirCapCm 

urn 

5.500 

AAA 

107.730 

402 

+002 

-039 

+013 

Oea Konlroflbank 

owes 

5050 

AAA 

100500 

4.40 

+000 

-031 

+020 

Crad Local de Fuse 

04A» 

5050 

AA+ 

104910 

4FD 

+005 

-027 

+040 

Ecu fauna 

Bayer Hn»&M*Bk 

07/DI 

5 WO 

AA- 

102554 

401 

+008 

-020 

+023 

Ded Fancier France 

G3.W 

0375 

A 

116207 

454 

♦004 

-059 

+085 

Em> tor Bank 

04AM 

5250 

AAA 

100280 

396 

+0 03 

-039 

+007 

ABN ArnraUdg. w 

04/07 

0375 

AA- 

110655 

480 

-003 

-017 

+068 


Si van 


3 5 7 10 15 

- . YaaistDDBbitty 

nrefTMnMtoi 


20 


30 


GOVERNMENT BOND SPREADS vs ECU 


rmai rtwrtii ii rwiil r nm r>in — ran mi r nr rm-^l r m — r rtfi ~^r rmf 

Tartto are mMMI la* aad> al to Mai Sato Etoa» ato Iba RareH 6m tea are read « fibe 
M natarel odn Mto Mto te a irttoto M mik 4 to tomte M Btomot. FOE Emre Mkm 
n otoM % rai MnaareiL 


Sap 18 

2 yia 

5m 

7yra 

10 m 

20 m 

30 ft* 

*W 

Atadrte 

-001 

+013 

+023 

+005 

-013 

+018 

Betare 

-008 

+000 

+012 

4010 

+012 

+006 

FHand 

-016 

+011 

+019 

+019 

-031 

-063 

Ranee 

-Oil 

-007 

-008 

-007 

-005 

-014 

Germany 

-018 

-004 

+002 

-025 

+002 

-019 

total 

+045 

-005 

+008 

+017 

+024 

+050 

toy 

+028 

+030 

+032 

+025 

+018 

+023 

Ltrrembeug 

-008 

+008 

+012 

+010 

+012 

+006 

NMhotah 

-am 

+004 

+003 

-007 

+004 

-014 

rm«ai 

-007 

+019 

+024 

+020 

+043 

+039 

Spate 

-009 

+013 

+024 

+829 

+021 

+024 

■aura' 

DennarK 

+1.11 

+082 

+076 

+053 

+027 

+068 

Bean 

+807 

+505 

+424 

+009 

+801 

*209 

Sweden 

+056 

+004 

+067 

+054 

+055 

+023 

UK 

+221 

+1-39 

+122 

+088 

+027 

-028 


Same: htoadm Dm/FT kdcmsDM Lamm cUbhb. ForgMo nmtossMia Pancm to Ema in* 
menHgns and taipWt ato or Hg tun ezaie IHW Em issues » Baaed re to new unrney: En 
bonds are issued n Ecn bre corimt to tons in <89 


EUROZONE CREDIT SPREADS vs ECU 

Sap 18 


S 8 P 
rating 


Red 

data 


Cantdcy Spread 

CUpn mete spread w> ago 


Spread 
mo ago 


KPH 

AAA 

ou» 

5000 

DEM 

+011 

-am 

♦one 

Franca Tekora 

AA+ 

11/06 

6X50 

FRF 

+018 

+012 

+017 

Htasi 

AA 

07/07 

5025 

DEM 

+0 34 

+023 

+016 

tag Bank NV 

AA- 

01/06 

5500 

NLG 

+014 

+0.19 

+010 

Buyer Hypo W BK 

AA- 

002 

6.750 

m, 

+032 

+0.30 

+033 

Crad Fancier 

A 

02/03 

7250 

OEM 

+095 

+0.79 

+030 

Tbomren-Braraaint 

A- 

03/04 

6275 

FRF 

+040 

+041 

+043 

Generals des Earn 

BB0+ 

03AM 

6250 

FRF 

+0» 

+035 

+024 

BsriotCHna 

B88 

07/99 

7.125 

DEM 

+2.45 

+052 

+103 

NaBknfHwgBty 

BBS- 

06/01 

9000 

ATS 

♦1.47 

+224 

+092 

Korin Der Barit 

B&+ 

11/02 

5025 

FRF 

+045 

+1006 

+6.48 

Arguria 

BS 

04/08 

8.125 

XEU 

+733 

+087 

+3.73 


Sara: KrracUre DatoFT Mpmaian. TaMe Onto pM apreada la toe Eca one to 
Unto l ep re a eaniiw credt to eoeti ratog band deBon wa tM «Em V aeranore 


mm al a 


Same: mansdre DauffT htonndaa T«6*a to 
ann to bkD amnqf and canpsres to Dm 


■a amam eanuretoi amtort mabrty naeay ytaH 
judal ratouto Ecu am to atodato a vraad. 




-Oi 


FTSE EUR0T0P 300 


Wre Chgi bBdaap to 

fB4 *«■ EeMN W W Bto. 


Maa CM MKnp to 

(toll ♦«- EMM W « to. 


(fa) +*- EraM W W «to 


tote* agaMdato to 

Cto *er- Batot M ™ 


ALCOHOUCBEVSIMES 


OtSTFOBOTORS 


HOOSSOLO GOODS ft TEXT1ES 


raAnucamcAis 


B.I4 

-* 

a* 

Al 

50 

IKMre Item 

■BJB 

41 

30 

CU 

10 

MH 

04 

16 

- 

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These transactions demonstrate flow our expertise in international capital raising 
benefits our clients. The quality of our research and multi-currency execution 
capabilities position us at the forefront of the EURO market, whether for a debut issue, or 
the longest ever issue, or an innovative floating rate structure. It's what our clients across 
the globe have come to expect in the EURO marketfrom Credit Suisse First Boston. 


CREDIT 

SUISSE 


FIRST 

BOSTON 




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33 


FINANCIAL TIMES 


MONDAY SEPTEMBER 21 1998 ★ 


on a 52 week basis 


I— TM — 


+ /- 


m«M 


Bgb iw w m 


W ORLD STOCK MARKETS 


► /- mgk IhH m 


EUROPE 

WSWftfSepie/SeU) 



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FT/S&P ACTUARIES WORLD INDICES 


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I 225.75 

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112.16 


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145X4 

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115X2 

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374.32 

331X2 

237X2 

212X5 

216X3 

18054 

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152X4 

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120.70 

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94.17 

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256X7 

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174X4 

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13177 

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FINANCIAL TIMES MONDAY SEPTEMBER 21 1998 ★ 


■t: At*'"*-. 


A • *j 

•Vi >£• ‘.1? 


US INDICES 


GLOBAL EQUITY MARKETS 


US DATA 


•V • *5 1~* 
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17 18 HW» In* 


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■ act«e stocks 
FM or Soda CA 


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PH 225 1300.72 13859.14 1410TJ7D 172BU4 

0*8 HP MOKm Dqre In 13067JS. 

■ TOMJ TRADING ACTMTT 


T389S.T4 MfM 8525 


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■ MTHE STOCKS 
Pithy SKC 


nC40 346522 352528 372132 438848 288154 

D«e hhfc 35U53. D*i br 543X5& 

■ MWSTMWH8/B1MTT \ 

■ PC1TVE STOCKS ■ KME5T NOTES 


418048 98411 


i;824251290 


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10700406 ISh •* 
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9.184100 38| -A 
M 10.100 30* -* 


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5797400 70* 

8748160 40* -H 

6245200 72f +| 

9,807100 58* -314 

8KB100 29* -* 

5482200 53V* -JW 


i*t +141 
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10HJ4.J5 16 37 -IB 


60075 414 

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48141 12138 

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bsm price 

47,478100 19 
12131100 100 
1061000 2SD 
8111000 1110 
8.003100 410 
6184100 365 
E1Z710D 658 
0311100 90 

5.48QMO IK 

5.349100 1920 


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153 +15 +101 

133 +12 +61 

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308 -27 -4.1 

1274 -91 -6.7 


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11KB150 555 -M 
2,402,747 430 +5 

1HMH2 23 -71 

1108.156 323 +8 

11*1100 5926 
1105185 275.1 -131 
825143 874 -12 

78*118 224 -301 

747741 2681 +131 

120288 681 -21 


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Aug 28 

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BWCo M 126100 4R4 +14 

m 12,841200 83 

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ita«p iQmrai in* -2H 

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3CM 7.432100 30* +« 

WWS» 7293100 234* -* 

(Sera Ep 6139400 H( -U 


2344 +204 

11* +T| +20.4 

24* +35 +171 

163* +2H +101 



MX 458950 488911 485717 BT7L43 

DpB HEP 470991 D^S tar 446436 

M RWWWTTltMlMB PCIMITT 

■ ACTIVE STOCKS ■ BM8B 


40B72B 017113 931.18 FI5E HO 50598 51328 5291.7 617910 SORGO 

DVB N)p 9522 Dq*l lo» 5034.7. 

WtoM:18.W01M ■ IQWOinHMMB ACTWTTY W 

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6179 OKI 


1:1,130100000 


10H -aw -18.1 

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25S -» -101 

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10 11 14 15.16 17 18 
Sep 1898 .. 


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RUv Shdra Qm 

nM price 
Btjer l ipy c m 6485 

Stan 1.131^75 992 

Lohwi 1,103107 35.7 

n Bk 1153KB BM 

Qnnah 680576 <91 

b Id 97*176 52.4 

DM* 809160 148 

BfSf 804132 827 

taftV 730171 132 

Wreta 685180 147 


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Mv 103410 104010 

■ Hftteiza Open Segpnce 

to 138800 138501 

tar - 138801 

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+110 103810 102110 158177 374182' ®ep fflKl 

+110 104210 103110 72 6,717 to 85885 

[to In* Ed. ta. Open taL 

+1501 139601 136001 22.111 168136 to 47800 

- RiM Mn 47500 


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□ansa 

MW 

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34759 

-629 

36149 

34529 

113556 

203X68 

35035 

-625 

35685 

34849 

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31996 

46555 

+109 

47809 

45619 

38979 

80566 

46919 

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47509 

46069 

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44,637 


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MW 

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58450 

588.00 

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60690 

57750 

580J9 

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13537 

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6*519 

64999 

1964 

943 

16559 

15529 


WORLD MARKETS AT A GUNGE 


^ h- P 

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Coaay Mb 


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takh ton Attn M 36166 M 58434 286 

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fttarf pBupatf 12 |er ta ata rataM tanpa**ll wufc 

ted BmnpB 67100 84321 B78O0 1229910 15/4 


2K&20 1/9 312 171 

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38917 36 115 111 


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FINANCIAL TIMES 


FT GUIDE TO THE WEEK 




MONDAY 21 


Progress reports 


The United Nations committee oh the 
rights of the child begins a three-week 
session in Geneva to.examine states' 
compliance with the UN convention on 
children's rights. The 1989 convention 
has 191 members, more than an/ 
other human rights convention, with 
only the US and Somalia failing to 
ratify. The five countries whose reports 
wifi be examined this session are 
Ecuador, Iraq, Bolivia, Kuwait and 
Thailand. 


EU-ACP discussions 


The European Parliament and African, 
Caribbean and Pacific countries hold a 
Joint assembly in Brussels which wlU 
discuss subjects Including fisheries, 
the effects of the single currency, debt 
education and training, health, 
environment and biodiversity, 
biotechnology and post-conflict 
rehabilitation. 


UN reassembly 

The United Nations General Assembly 
Is scheduled to start its general 
debate, in which foreign ministers and 
other senior officiate deliver policy 
statements. 



Holidays 

Armenia, Malta, Israel. 



a 



SATURDAY 26 


Chess In a mess 


Trie cpmnr/grsiat33rd World Ches&f.' 

Olympiad fbrmeri'sand. women ^ 

teams opens atSista, capital of - > 
Kalrriyfce, a 3emf^autonomous Russian 
republic near** Caspian Sea. it te the 
brafocWkf of KJftan Uyumzhmov, - 

president Of bfirth Kalmykia and of the 
International :criess Federation, who ; . 




expects to house nearly 200 teams in a 
specialty constructed Chess City until 
the tournament ends on October 13. 
The murder of a Journalist, reports that 
Chess City 1s only partly built and the 
republic's dispute with Moscow over 
unpaid taxes have tamtehed the 
event's credibility, and several 
grandmasters have withdrawn. 


Holiday 

Malta. 


TUESDAY 22 


Helmut Kohl, German chancellor for the past 16 yens, Mom the moat serious chaBonge yot to his leadsrahip, from Gerhard Schrflder’s Social Democrats, In Sunday's ejection 


IT Jobs gap 

High unemployment Is one of Europe's 
biggest problems, yet tens of 
thousands of Jobs in the information 
technology sector remain unfilled 
because of a shortage of skilled 
workers. Dr Martin Bangemann, 
European commissioner for IT and 


Trade disputes 


Holiday 


>/ V 1 , 


> fv • - > 
V‘ 1 ■ , f •• V 



The dispute settlement body of the 
World Trade Organisation meets In 
Geneva. Among high-profile disputes 
on the agenda are requests by Japan 
and the European Union for a panel to 
Investigate sanctions imposed by the 
US state of Massachusetts on 
companies doing business with Burma. 
The US and five Latin American 
banana producers also want a panel to 
examine EU proposals for reforming Its 
banana import regime. 


WEDNESDAY 23 


Padralg Flynn, employment 
commissioner, address the problem in 
a meeting hosted by Microsoft In 
Brussels with 200 senior 
representatives of IT companies, 
national governments, think tanks and 
academics. 


Church birthday 

The Geneva-based World Council of 
Churches celebrates Its 50th 
anniversary. Participants in the official 
ceremony, whose theme is "Justice 
and human rights In the 21st century”. 
Include Swiss president Bavto Gotti, 
Sadako Ogata, UN High Commissioner 
for Refugees, and Archbishop 
Desmond Tutu of South Africa. 


Talking business 

The International Chamber of 
Commerce holds a two-day meeting in 
Geneva at which business executives 
and heads of international 
organisations will discuss the 
management of globalisation in the 
light of the financial crisis and fears of 
world recession. The meeting, termed 
the Geneva Business Dialogue, stems 
from a cad by UN secretary-general 
Kofi Annan for a closer partnership 
between the UN system and the 
private sector. 


Report The iLO says economic growth 
since 1996 has failed to make a dent 
tn Joblessness, while the crisis in east 
Asia has thrown millions more out of 
work. The ILO emphasises the 
importance of training In helping 
vulnerable groups including the young, 
unskilled workers, disabled people and 
women. 


general council meeting will also 
discuss a WTO work programme on 
electronic commerce over the coming 
year. 


Kohl's crossroads 


Holidays 

South Africa, Spain. 


Obuchl meets Clinton 


Kelzo Obuchl, Japan's prime minister, 
meets Bill Clinton, the US president, In 
New York. The two win exchange 
views on Japan's economic 
revitalisation policy, the krtemationa! 
economic situation, and Japan-US 
security ties. Mr Obuchl win be able to 
brief Mr Clinton on Japan's recent ■ 
progress towards a final agreement 
over a set of banking bills to stabilise 
its financial Industry. 


Fixed Income facts 

Paul Mortimer-Lee, chief economist of 
Paribas Capital Markets and David 
Levey, managing director and co-head 
of the Sovereign Risk Unit at Moody's 
Investors Service are among speakers 
at a two-day London conference on 
International fixed Income markets. 
Contact 0171 915 5103. 


FT Surveys 

FT Exporter (UK and European editions 
only); Office for the Future. 


FSA explains itself 

Britain's Financial Services Authority, 
which under new legislation will take 
over the work of nine existing financial 
sector regulators, holds a conference 
to explain to the financial services 
industry how it Intends to fulfil Its 
statutory objectives covering market 
confidence, consumer awareness and 
protection, and the reduction of 
financial crime. FSA chairman Howard 
Davies and Stephen Byers, chief 
secretary to the Treasury, are among 
speakers at the conference. Contact 
01483 720 707. 


FRIDAY 25 


Holiday 

Japan. 


THURSDAY 24 


FT Survey 

Ireland. 


Jobs crisis 


The International Labour Organisation 
publishes Its latest World Employment 


WTO plans ahead 

The Work! Trade Organisation in 
Geneva holds a special general council 
meeting to begin preparations for its 
next ministerial meeting In 1999 which 
will launch new global trade talks. The 
ministerial meeting, to be held late next 
year in the US, will have to decide 
whether to add more topics to the 
already programmed talks on 
agriculture and services, and whether 
to have a single "round" or more 
staggered negotiations. Today's 


Slovaks go to vote 

Slovaks go to the polls today and 
tomorrow in an election that could see 
tite first defeat of prime minister 
Vladimir Meclar since the tell of 
communism in 1989. The last opinion 
poll gave the combined opposition, 
which has agreed to co-operate, 
around 60 per cent of the vote against 
34 per cent for the governing coalition. 
Opposition parties have complained of 
bias on the state-run TV. and radio 
stations and have also said they will 
run their own election count to ensure 
there te no fraud. 


Germany votes to decide its 
government for the next four years. 
After 16 years as chancellor, Helmut 
Kohl Is fighting for re-election against a 
strong challenge from Gerhard 
SchnBdar. the Social Democratic 
candidate. Opinion polls have put Mr 
SchrMer ahead but in Bavaria's state 
elections earlier this month pre-poll 
projections proved inaccurate. Mr 
Schr&ter has paid tribute to Mr Kohl's 
past achievements, but says the 
chancellor has been in office too long. 
Germany's electoral system, however, 
means Mr. SchrOder would almost 
certainly have to form a coalition, with 
the environmental Green party - or 
even with Mr Kohl's Christian 
Democrats. Mr Kohl's fate could be 
decided by the results of other small 
parties besides the Greens. 


Party problems 


Financial problems 

World financial problems will dominate 
discussions when European Union 
finance ministers gather In Vienna for a 
two-day ” Informal" meeting. Rudolf 
Edlinger, finance minister of Austria, 
holder of the rotating EU presidency, 
will update ministers on developments 
in Russia following a planned visit 
tiiere during the week. 


The leadership of Britain's Labour party 
could face a setback at file start of Its 
annual conference in Blackpool If, as 
feared, a number of leftwing 
candidates win places on the ruling 
national executive committee. The 
leadership te also likely to face a rough 
ride over the government's handling of 
the economy and electoral reform. But 
changes to the conference procedures 
should limit public rows. 


Complied by Roger Beate 
Fax 44 171 873 3196 



ECONOMIC DIARY 


Financial Times Surveys 


ZZ Other economic news statistics 


to be released this week 


■ . \.i*: . - • •, 

! .... ■, •! 


■ '*•' ' 1 


Monday; Japan’s trade 
figures for August should 
continue to show modest 
export growth, as strong 
demand from Europe offsets 
the drop in shipments to 
Asia The trade surplus Is 
expected to decline, but the 
surplus remains high. 
Tuesday: The French trade 
surplus tor July is likely to 
teU to around FFrl4bn - 
after June's FFr15bn surplus 
- taking it into line with the 
average surplus for the last 
six months. 

Thursday: The UK's national 
accounts are rebased from 
1990 to 1995 prices for the 
first time, with the 
publication of the final 
estimate of second quarter 
GDP. The European System 
Of Accounting Is also being 
adopted. The new accounts 
entail wide-scale changes to 
the definition of many data 

Friday: US personal 
consumption and Income 
figures for August are 
published, with weaker 
August retell sales 
suggesting that consumption 
may be slightly weaker. But 
annual growth In incomes 
and consumption is 
expected to be around 5 per 
cant. 




■P«f 

Mlw d Country. 


;8sfr2^ My 
-TUie t ■japan ?. 


catted*. 

ISSTSSE 

- g •' ■wf» V ■ 

ThOr- ■ Bence 
'Sap 8*+ Ritter* 


.03 ftp* tjqmwtfc producer 
02 gross ckxq^^ pro^&^et* , 
■Jul wd* wiser .. . 

Jij cojock^nt Index •• , • ~ 

JUt trade botencot 


tUB iUn - 7. 

■.■Sep.consurnsrtJrioi lndex*V(Tokyo} • 7.;+a3%~ 




ZEZZSZ- 

. k ■ us '”7 




- . Jul. k»yj^dtft>nwttai .jhda*' , - 5CM«fr : 

^ jut trade; tw ^n c st „■ FFri4bn 

. JJ tntar*ha» MtaeWaa tr a nsa cti o n ! * -C$Mjbn 

• Adp Hading tadtetoof* - , . r 

juj household oooe amptf o n p . • ■ ••+ - 2.8% 

: AOg'hQuaehold oowumpdonf' . . V, -L9X - 

, (gtlndflrpssdomtstepnxiucr*. 05%- 

02 «Mt-srau domestic product* . 2-6% . 

1 .'fifr i " m n • } * - . I ~ 

i-.Q^ettipwi.eocdurit. - £2bn 

SepCBl fcteutertsttranda' • . . . 

;Q a flrow dom—tic product Artel 1.8% ■ 

02 qr^ do>TV p<otf ch«tn prtCo faxf^ ■' 

" W t talclpI t w Sap 19 • ' . , ■■■ r- . 3fl6jt • 

Stste^aijaffls Sep 12 ■ ■ • . 

Q2 afiartwt cor p orate profit find 
AtlgtiUrabto enters . . 0.1% 

~ aj^pnisriti - t''-. 

~~ Aug : aeriauify backytf _■ 

; /Mf>wifc e ridotfSapl4 : -S3£bn 

• • .tte-Wedk <y>dad Ssp-14 - :S8:7bn 

; MS %vaatt added Sap 14 - • ^ ' ^SS.=fbn 


FFrlMbn. 


C$0.4br». 


•••iirtem; '?4e»h 


2.4% 

-03% 

-S24rlbn 


Sap 2S japan Sap .arris'; pto'-IntteK 

Japan . ' Aye contiumar prioe ind«**;6rwnpf^;v. 1 '.. V ; • • '-q.1 % . - - 
. Japan . - : Aup cona 1 price Jndax Bac-p 4 rtfh sb fea^ 0096 -<L 1 % ^ 

r ' .• . . Franca _ :; Aub oonsuroer'prica frufax;!^: • ;? ■ ~aj% *. - y ; ^ 04 % • •> 
Branca ; -,'Auq consumar prtorlndw insP <■•.* 0 . 7 %>. • V 

. • ftaty-.; ’ Jul linanyloyirianr rate \ 7 

UK;, ■' Aug Rl ftgrnonlsad cons’ prto»k*dex 
.... ~ . USV. , .Aug panronaf IncomaT^ 0 ^%?'; r'WC-' 

V ' • . us:, } Aug personal conawner-«penefltija ~ QJ 5 % : WA~ ; v 

US , . Aup adste)q homa^aieay ' .L ; v 7 ■ 'AgSrn ' y;~ 

• Purin^tfta waak... •_ -7;.' 'S. :' r r- : ; 

: Gamamy At^j-producar prica ; hefepe*..: ‘ ' ’- 02 % 

_ Qmrnany Aug produoarrprica ind«P* ^ -07%- - -7 -04%; 

. RU»»la Aup conaurty. prica Indej^J =' . : 77' 2 t;T%.~- ; '.y;. 4 . 2 % 

. ; Garrqany; Sap Hwat co«t 08 % • ‘ 

flymany .Sap NonS RWna Hjastfr-gife at Bieigj" ■ y • - : y i« p.e%v 
■/ . Germany 6ap Bavaria cost of fortnQTf V - v % 3 y\OS% 

Gartnany ' Sap Badari Woart coat .of TMntf*; ' 7 1 ; ’ . \ 0-6% 

Germany Adq, import priCaa? -,- 7 ■■fi , J, :.y '- 4 ^%- • 7 i/~ : ~ -OA% - 
Garm^ny- lyAqo import priow^ - ;f' ; 'T.7-7. C' yr'- ; -oa% ^ 
Japm ' Sap tradaiMlanoa gii^TO’da^.nol^^y^_^.; : V^Y 2 (ga^~F~ 
• ■ Gemwy. Sap /jarel 1 coat of HybrgT ~ • 

• Qanpyif: -90# !. 

"tnohSi 9 1 nwidi; *>*r in jB^-rrqr on qtr.’ Poof'rUtiS. 


: --07%^ '^ -a^ae. : : 


4.2% 

v-.; : ;v- 09% 


ACROSS 

l, 4 It took a lot of capital in 
168S(4A6) 

8 In script I'd even men- 
tioned turbulent water (7) 

9 Is to take dead duck into 


? n *p|ntiwa (7) 
et hissing contraption 
should ensure cleanliness 
DO) 

12 Working with newspaper 
round water container (4) 
IS George wants a popular 
cereal (6) 

14 Fall to notice finished 
appearance (fl) 

IS Next time Jack takes a 
little US money (8) 

18 Brute mashing potato, lor 
instance? (S) 

20 Besides, has died during 
the commotion (M) 

21 Call on nine cooks to make 
something to eat (10) 

23 Cleaner takes home about 
£1,000, causing annoyance 
(7) 

m Prisoner only after comfort 
(7) 

25 Girl following sailor com- 
ing back sooner (6) 

28 Something left tn clay mix- 
ture, for example (6) 


DOWN 

l, 13 Pretty student omitted 
to sponsor pantomime 
character (6,9) 

2 Picking up ruler stain dress 
with wine (7) 

8 Regulation for weapons I 
Introduced (9) 

5 te after love when with a 
group of singers (5) 

6 Blue party fell out about 
onion leader (7) 

7, 22 There's none you'll try 
on, perhaps? No way! 
(SAW) 

10 Guarding car tn top garage 
( 9 ) 

13 See i down 

15 Steak is part of meal paten 
out of bed! (9) 

17 Surrounded by anxiety 
takes a little time 17) 

19 Label Is half bidden in a 
sort of beacon CD 

21 Top Californian fruit region 
(5) 

22 See 7 down 



MONDAY PRIZE CROSSWORD 

No.9,792 Set by GRIFFIN 


Actuarial 

Services 


Wednesday October 14 




For further information please contact: 


Derek van Tienen 
Tel: +44 1442 843300 
Fax: +44 1442 843123 
email: l0616O.1661@compuserve.com 


A prize of a Tombow Lucca fountain pen and rollerball set, worth £138, 
will be awarded for Che first correct solution opened. Solutions by 
Thursday October 1, marked Monday Crossword 0,792 an the envelope, 
to the Financial Times, 1 Southwark Bridge. London SE1 9HL. Solution 
oa Monday October 5. Please allow as days for delivery of prizes. 


Tracey Endacott in London 
Tel: +44 171 873 4356 
fax: +44 171 87 3 4862 
email: tracey.endacott@FT.com 


Name — - 


Address — 


FINANCIAL TIMES 


Solution 9,780 


No FT, no comment. 


Winner of Puzzle No.9,780: R.A. Terfouss. Uttoxeter, 
Staffs 


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TOMBCfT 


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TEL: (01732) 771771 





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